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Inequality and Poverty in China during Reform

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  • Sangui Wang
  • Dwayne Benjamin
  • Loren Brandt
  • John Giles
  • Yingxing Li
  • Yun Li

Abstract

This paper provides an overview of the evolution of income inequality and poverty in China from 1987 to 2002, documenting significant increases of inequality within China's urban and rural populations. In rural areas, increased inequality is primarily related to the disequalizing role of non-agricultural self-employment income and the slow growth in agricultural income from the mid-1990s onward. Poverty persists, and tied in part to slow growth in agricultural commodity prices. In urban areas, the declining role of subsidies and entitlements, the increase in wage inequality, and the layoffs during restructuring have fueled the growth in inequality within urban areas. Poverty levels, however, are very low. China should give more emphasis on education, training, and other human development efforts in its poverty reduction strategy since return to education increased rapidly and became a major source of inequality. A nationwide "social safety net" and an effective redistributive taxation system should be adopted and implemented to ensure that the poor can benefit from the fruits of rapid economic growth.

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Bibliographic Info

Paper provided by PEP-PMMA in its series Working Papers PMMA with number 2007-07.

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Date of creation: 2007
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Handle: RePEc:lvl:pmmacr:2007-07

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Keywords: Income inequality; poverty; welfare; growth; reform; transition; policy; China;

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References

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  1. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
  2. Dwayne Benjamin & Loren Brandt & Paul Glewwe & Li Guo, 2000. "Markets, Human Capital, and Inequality: Evidence from Rural China," Working Papers benjamin-00-01, University of Toronto, Department of Economics.
  3. Loren Brandt & Dwayne Benjamin, 1999. "Markets and Inequality in Rural China: Parallels with the Past," American Economic Review, American Economic Association, vol. 89(2), pages 292-295, May.
  4. Gustafsson, Bjorn & Li, Shi, 2004. "Expenditures on education and health care and poverty in rural China," China Economic Review, Elsevier, vol. 15(3), pages 292-301.
  5. Dwayne Benjamin & Loren Brandt & John Giles, 2004. "The Evolution of Income Inequality in Rural China," William Davidson Institute Working Papers Series 2004-654, William Davidson Institute at the University of Michigan.
  6. Shorrocks, Anthony F, 1983. "The Impact of Income Components on the Distribution of Family Incomes," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 311-26, May.
  7. 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.
  8. "Rawski, Thomas G.", 1982. "The Simple Arithmetic of Chinese Income Distribution," Economic Review, Hitotsubashi University, vol. 33(1), pages 12-26, January.
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Cited by:
  1. Shijun Ding & Laura Meriluoto & W. Robert Reed & Dayun Tao & Haitao Wu, 2011. "The Impact of Agricultural Technology Adaption on Income Inequality in Rural China," Working Papers in Economics 11/04, University of Canterbury, Department of Economics and Finance.
  2. Zhai, Fan & Hertel, Thomas W., 2009. "Economic and Poverty Impacts of Agricultural, Trade and Factor Market Reforms in China," Agricultural Distortions Working Paper 52787, World Bank.
  3. Belton Fleisher & Xiaojun Wang & Haizheng Li & Shi Li, 2009. "Access to Higher Education and Inequality: The Chinese Experiment," Working Papers 09-02, Ohio State University, Department of Economics.
  4. World Bank, 2012. "Well Begun, Not Yet Done : Vietnam's Remarkable Progress on Poverty Reduction and the Emerging Challenges," World Bank Other Operational Studies 12326, The World Bank.
  5. Almås, Ingvild & Johnsen, Åshild Auglænd, 2013. "The Cost of Living in China: Implications for Inequality and Poverty," Memorandum 06/2013, Oslo University, Department of Economics.

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