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Globalization and the Urban Poor in China

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  • Yin Zhang
  • Guanghua Wan

Abstract

This paper examines the distributional impact of globalization on the poor in urban China. Employing the kernel density estimation technique, we recovered from irregularly grouped household survey data the income distributions of 29 Chinese provinces for 1988–2001. Panels of the income shares of the poorest 20, 10 and 5 per cent of the urban residents were then compiled. In a fixed-effect model, two of the central conclusions of Dollar and Kraay (2002) – that ‘the incomes of the poor rise equi-proportionately with average income’ and that trade openness has little distributional effect on poverty – were revisited. Our results lend little support to either of the Dollar-Kraay conclusions, but instead indicate that average income growth is associated with worsening income distribution while globalization in general, and trade openness in particular, raises the income shares of the poor. It is also found that openness to trade and openness to FDI have differential distributional effects. The beneficial effect of trade was not restricted to the coastal provinces, but weakened significantly after 1992. These findings are robust to allowing for nonlinearity in the effect of globalization and to controlling for the influence of several other variables.

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File URL: http://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_196.pdf
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Bibliographic Info

Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 196.

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Length: 29 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:dun:dpaper:196

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Keywords: Globalization; poverty; China;

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References

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  1. Sylvie Demurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao, Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," NBER Working Papers 8897, National Bureau of Economic Research, Inc.
  2. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 160-78, May.
  3. Ming Lu & Guanghua Wan & Zhao Chen, 2010. "Globalization and Regional Income Inequality: Evidence from within China," Working Papers id:3179, eSocialSciences.
  4. Keith Griffin & Azizur Rahman Khan & Carl Riskin, 1999. "Income Distribution in Urban China during the Period of Economic Reform and Globalization," American Economic Review, American Economic Association, vol. 89(2), pages 296-300, May.
  5. Antonio Spilimbergo & Juan Luis Londoño & Miguel Székely, 1997. "Income Distribution, Factor Endowments, and Trade Openness," Research Department Publications 4088, Inter-American Development Bank, Research Department.
  6. Galí, Jordi & Monacelli, Tommaso, 2002. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," CEPR Discussion Papers 3346, C.E.P.R. Discussion Papers.
  7. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
  8. Ravallion, Martin, 2001. "Inequality convergence," Policy Research Working Paper Series 2645, The World Bank.
  9. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  10. Xavier Sala-i-Martin, 2002. "The disturbing "rise" of global income inequality," Discussion Papers 0102-44, Columbia University, Department of Economics.
  11. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
  12. Branko Milanovic, 2003. "The Ricardian Vice: Why Sala-i-Martin’s calculations of world income inequality are wrong," HEW 0305003, EconWPA.
  13. Ravallion, Martin, 2004. "Looking beyond averages in the trade and poverty debate," Policy Research Working Paper Series 3461, The World Bank.
  14. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
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Cited by:
  1. Camelia Minoiu & Sanjay Reddy, 2014. "Kernel density estimation on grouped data: the case of poverty assessment," Journal of Economic Inequality, Springer, vol. 12(2), pages 163-189, June.
  2. Amiti, Mary & Cameron, Lisa, 2011. "Trade Liberalization and the Wage Skill Premium: Evidence from Indonesia," CEPR Discussion Papers 8382, C.E.P.R. Discussion Papers.

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