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Explaining the Poverty Difference between Inland and Costal China: A Regression-based Decomposition Approach

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Wan, Guanghua
Zhang, Yin

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Abstract

This paper proposes a decomposition framework for quantifying contributions of the determinants of poverty to spatial differences or temporal changes in poverty. This framework is then applied to address the issue why poverty incidence is higher in inland than in coastal China. The empirical application requires household or individual income observations which, generally speaking, are not available. Thus, a data-generation method developed by Shorrocks and Wan is introduced to construct such observations from grouped income data. It is found that inland China is poorer than coastal China, mainly due to lower efficiency in resource utilization not to less endowment of resources. Also, trade became poverty-reducing in coastal China in the late 1990s but remained poverty-inducing in inland China. Policy implications are briefly discussed.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number UNU-WIDER Research Paper RP2007/07.

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Length: 16 pages
Date of creation: 2007
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Handle: RePEc:unu:wpaper:rp2007-07

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Keywords: poverty; regression-based decomposition; quantile; China;

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  1. Foster, James E & Shorrocks, Anthony F, 1991. "Subgroup Consistent Poverty Indices," Econometrica, Econometric Society, vol. 59(3), pages 687-709, May. [Downloadable!] (restricted)
  2. Duangkamon Chotikapanich & D. S. Prasada Rao & Kam Ki Tang, 2007. "Estimating Income Inequality In China Using Grouped Data And The Generalized Beta Distribution," Review of Income and Wealth, Blackwell Publishing, vol. 53(1), pages 127-147, 03. [Downloadable!] (restricted)
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  3. Loren Brandt & Carsten Holz, 2005. "Spatial Price Differences in China: Estimates and Implications," Microeconomics 0512001, EconWPA. [Downloadable!]
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  4. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January. [Downloadable!] (restricted)
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  5. Xavier Sala-i-Martin, 2002. "The disturbing "rise" of global income inequality," Discussion Papers 0102-44, Columbia University, Department of Economics. [Downloadable!]
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  6. Zhang, Yin & Wan, Guanghua, 2006. "The Impacts of Growth and Inequality on Rural Poverty in China," Working Papers RP2006/94, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  7. Datt, Gaurav & Ravallion, Martin, 1992. "Growth and redistribution components of changes in poverty measures : A decomposition with applications to Brazil and India in the 1980s," Journal of Development Economics, Elsevier, vol. 38(2), pages 275-295, April. [Downloadable!] (restricted)
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