Income Inequality During China's Economic Transition
AbstractThis paper provides an overview of the evolution of income inequality in China from 1987 to 2002, employing three series of data sets. Our focus is on both urban and rural inequality, as well as the urban-rural gap, with the objective of summarizing several “first-order” empirical patterns concerning the trajectory of inequality through the reform period. We document significant increases of inequality within China’s urban and rural populations. In rural areas, increased inequality is primarily related to the dis-equalizing role of non-agricultural self-employment income and 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. We find that spatial (regional) dimensions of inequality are significant, but are much less important than commonly believed for both the urban and rural populations, and for differences between urban and rural areas. Accounting for urban-rural reclassification, which otherwise exaggerates the rising urban-rural gap, we find a relatively stable ratio of urban to rural incomes. This hides some geographical variation, however: The urban-rural gap is increasing more rapidly in interior provinces, where SOE’s had a more dominant role in economic activity in urban areas, than in coastal provinces where the non-state sector was more important earlier in the reform period.
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Bibliographic InfoPaper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-238.
Length: 54 pages
Date of creation: 01 Jul 2005
Date of revision:
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China; Income Distribution; Poverty; Inequality; welfare; transition; development;
Find related papers by JEL classification:
- I3 - Health, Education, and Welfare - - Welfare and Poverty
- P2 - Economic Systems - - Socialist Systems and Transition Economies
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- D3 - Microeconomics - - Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-02 (All new papers)
- NEP-CNA-2006-07-02 (China)
- NEP-DEV-2006-07-02 (Development)
- NEP-SEA-2006-07-02 (South East Asia)
- NEP-TRA-2006-07-02 (Transition Economics)
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