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Globalization and the Urban Poor in China

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  • Zhang, Yin
  • Wan, Guanghua

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.wider.unu.edu/stc/repec/pdfs/rp2006/rp2006-42.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2006/42.

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Length: 28 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:unu:wpaper:rp2006-42

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Keywords: globalization; poverty; China;

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References

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  1. Loren Brandt & Carsten A. Holz, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 43-86.
  2. Easterly, William & Fischer, Stanley, 2000. "Inflation and the poor," Policy Research Working Paper Series 2335, The World Bank.
  3. Ravallion, Martin, 2004. "Looking beyond averages in the trade and poverty debate," Policy Research Working Paper Series 3461, The World Bank.
  4. Ravallion, Martin, 2003. "Inequality convergence," Economics Letters, Elsevier, vol. 80(3), pages 351-356, September.
  5. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
  6. Spilimbergo, Antonio & Londono, Juan Luis & Szekely, Miguel, 1999. "Income distribution, factor endowments, and trade openness," Journal of Development Economics, Elsevier, vol. 59(1), pages 77-101, June.
  7. Xavier Sala-i-Martin, 2002. "The Disturbing "Rise" of Global Income Inequality," NBER Working Papers 8904, National Bureau of Economic Research, Inc.
  8. Branko Milanovic, 2003. "The Ricardian Vice: Why Sala-i-Martin’s calculations of world income inequality are wrong," HEW 0305003, EconWPA.
  9. Guanghua Wan & Ming Lu & Zhao Chen, 2005. "Globalization and Regional Income Inequality--Evidence from within China," Econometrics 0511014, EconWPA.
  10. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  11. 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.
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Cited by:
  1. 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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