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Markets, Human Capital, and Inequality: Evidence from Rural China

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  • Dwayne Benjamin
  • Loren Brandt
  • Paul Glewwe
  • Li Guo

Abstract

Market reforms are generally credited with the rapid growth enjoyed by China's rural sector. This growth has not been without some cost, however, as inequality has also increased. Estimates suggest that the Gini rose from less than 0.20 to over 0.40 during this period. In this paper we go behind these numbers to explore the nature and causes of this inequality. To begin, we find that a considerable share of rural inequality is driven by local differences in household incomes, as opposed to regional income differences, that have been the focus of the previous literature. We then examine inter-household income differentials at the village level, exploring the links between education, market development, non-agricultural employment, and household income. To address these questions, we draw on a recently collected data set from Northeast China, that was collected by two of the authors in collaboration with Chinese colleagues in Hebei and Liaoning provinces in 1995. For purposes of comparison, we also draw on the Chinese Health and Nutrition Survey. We find that indeed, increasing rates of return to education and unevenly developed non-agricultural business opportunities contribute to the high levels of inequality in the countryside. Of most interest, however, is the implication that simultaneous improvements in educational attainment and off-farm market-development would allow more households to share in the rapid growth in rural China.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 298.

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Length: pages
Date of creation: 01 Jan 2000
Date of revision:
Handle: RePEc:wdi:papers:2000-298

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References

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  1. Rozelle Scott, 1994. "Rural Industrialization and Increasing Inequality: Emerging Patterns in China's Reforming Economy," Journal of Comparative Economics, Elsevier, vol. 19(3), pages 362-391, December.
  2. Matthew A. Turner & Loren Brandt & Scott Rozelle, 1999. "Property Rights Formation and the Organization of Exchange and Production in Rural China," William Davidson Institute Working Papers Series 250, William Davidson Institute at the University of Michigan.
  3. Yang, Dennis, 1995. "Education and Off-Farm Work," Working Papers 95-09, Duke University, Department of Economics.
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Citations

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Cited by:
  1. Loren Brandt & Dwayne Benjamin, 2002. "Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China," William Davidson Institute Working Papers Series 518, William Davidson Institute at the University of Michigan.
  2. Sangui Wang & Dwayne Benjamin & Loren Brandt & John Giles & Yingxing Li & Yun Li, 2007. "Inequality and Poverty in China during Reform," Working Papers PMMA 2007-07, PEP-PMMA.
  3. Glewwe, Paul & Gragnolatti, Michele & Zaman, Hassan, 2000. "Who gained from Vietnam's boom in the 1990s? An analysis of poverty and inequality trends," Policy Research Working Paper Series 2275, The World Bank.
  4. Chen, Xi & Zhang, Xiaobo, 2009. "The Distribution of Income and Well-Being in Rural China: A Survey of Panel Data Sets, Studies and New Directions," MPRA Paper 20587, University Library of Munich, Germany.
  5. Saccone Donatella, 2012. "Income Concentration in China: What Role for Education?," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201202, University of Turin.
  6. Huang, Qiuqiong & Dawe, David & Rozelle, Scott & Huang, Jikun & Wang, Jinxia, 2005. "Irrigation, poverty and inequality in rural China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(2), June.
  7. Dwayne Benjamin & Loren Brandt & John Giles & Sangui Wang, 2005. "Income Inequality During China's Economic Transition," Working Papers tecipa-238, University of Toronto, Department of Economics.
  8. Yao Li & John Whalley & Shunming Zhang & Xiliang Zhao, 2008. "The Higher Educational Transformation of China and Its Global Implications," NBER Working Papers 13849, National Bureau of Economic Research, Inc.
  9. Soohyung Lee & Benjamin A. Malin, 2009. "Education's role in China's structural transformation," Finance and Economics Discussion Series 2009-41, Board of Governors of the Federal Reserve System (U.S.).
  10. Dwayne Benjamin & Loren Brandt, 2002. "Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions," Working Papers benjamin-02-01, University of Toronto, Department of Economics.
  11. Lee, Soohyung & Malin, Benjamin A., 2013. "Education's role in China's structural transformation," Journal of Development Economics, Elsevier, vol. 101(C), pages 148-166.
  12. Wang, Xiaobing, 2007. "Labor market behavior of Chinese rural households during transition," Studies on the Agricultural and Food Sector in Central and Eastern Europe, LeibĀ­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 42, number 92321.

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