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Spatial Price Differences in China: Estimates and Implications

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Author Info
Loren BRANDT (University of Toronto)
Carsten A HOLZ (Hong Kong University of Science & Technology)

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Abstract

Prices differ across space: from province to province, from rural (or urban) areas in one province to rural (or urban) areas in another province, and from rural to urban areas within one province. Systematic differences in prices across a range of goods and services in different localities imply regional differences in the costs of living. If high- income provinces also have high costs of living, and low-income provinces have low costs of living, the use of nominal income measures in explaining such economic outcomes as inequality can lead to misinterpretations. Income should be adjusted for costs of living. We are interested in the sign and magnitude of the adjustments needed, their changes over time, and their impact on economic outcomes in China. In this article, we construct a set of (rural, urban, total) provincial- level spatial price deflators for the years 1984-2002 that can be used to obtain provincial-level income measures adjusted for purchasing power. We provide illustrations of the significant effect of ignoring spatial price differences in the analysis of China's economy.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0504010.

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Length: 42 pages
Date of creation: 21 Apr 2005
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Handle: RePEc:wpa:wuwpdc:0504010

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Find related papers by JEL classification:
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D3 - Microeconomics - - Distribution

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Wei, Shang-Jin & Wu, Yi, 2001. "Globalization and Inequality: Evidence from within China," CEPR Discussion Papers 3088, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Irving B. Kravis & Robert E. Lipsey, 1988. "National Price Levels and the Prices of Tradables and Nontradables," NBER Working Papers 2536, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Dennis Tao Yang, 1999. "Urban-Biased Policies and Rising Income Inequality in China," American Economic Review, American Economic Association, vol. 89(2), pages 306-310, May. [Downloadable!] (restricted)
  4. Trescott, Paul B., 1985. "Incentives versus equality: What does China's recent experience show?," World Development, Elsevier, vol. 13(2), pages 205-217, February. [Downloadable!] (restricted)
  5. Angus Deaton & Alessandro Tarozzi, 2000. "Prices and poverty in India," Working Papers 213, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies.. [Downloadable!]
  6. Adelman, Irma & Sunding, David, 1987. "Economic policy and income distribution in China," Journal of Comparative Economics, Elsevier, vol. 11(3), pages 444-461, September. [Downloadable!] (restricted)
  7. Hsiung, Bingyuang & Putterman, Louis, 1989. "Pre- and post-reform income distribution in a Chinese Commune: The case of dahe township in Hebei Province," Journal of Comparative Economics, Elsevier, vol. 13(3), pages 406-445, September. [Downloadable!] (restricted)
  8. meng, xin & wu, harry, 1994. "Household Income Determination and Regional Income Differential in Rural China," MPRA Paper 1345, University Library of Munich, Germany. [Downloadable!]
  9. Ravi Kanbur & Xiaobo Zhang, 2005. "Fifty Years of Regional Inequality in China: a Journey Through Central Planning, Reform, and Openness," Review of Development Economics, Blackwell Publishing, vol. 9(1), pages 87-106, 02. [Downloadable!] (restricted)
  10. Knight, John B & Song, Lina, 1991. "The Determinants of Urban Income Inequality in China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(2), pages 123-54, May.
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  11. Xiaobo Zhang & Ravi Kanbur, 2001. "What difference do polarisation measures make? an application to China," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(3), pages 85-98, January. [Downloadable!] (restricted)
  12. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, vol. 7(1), pages 23-56. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sylvie DEMURGER & Martin FOURNIER & CHEN Yi, 2006. "The Evolution of Gender Earnings Gaps and Discrimination in Urban China: 1988-1995," Working Papers 23, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
    Other versions:
  2. Bjorn Gustafsson & Ximing Yue, 2006. "Rural People’s Perception of Poverty in China," IZA Discussion Papers 2486, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Branko Milanovic, 2005. "Global Income Inequality: What It Is And Why It Matters?," HEW 0512001, EconWPA. [Downloadable!]
    Other versions:
  4. Yi Chen & Sylvie Démurger & Martin Fournier, 2007. "Différentiels salariaux, segmentation et discrimination à l’égard des femmes sur le marché du travail chinois," Working Papers 0713, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  5. Bjorn Gustafsson & Deng Quheng, 2007. "Social Assistance Receipt and its Importance for Combating Poverty in Urban China," IZA Discussion Papers 2758, Institute for the Study of Labor (IZA). [Downloadable!]
  6. Belton Fleisher & Haizheng Li & Min Qiang Zhao, 2007. "Human Capital, Economic Growth, and Regional Inequality in China," IZA Discussion Papers 2703, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. Sylvie Démurger & Martin Fournier & Li Shi & Wei Zhong, 2006. "Economic liberalization with rising segmentation on China’s urban labor market," Working Papers 46, ECINEQ, Society for the Study of Economic Inequality. [Downloadable!]
    Other versions:
  8. Sylvie Démurger & Marc Gurgand & Li Shi & Yue Ximing, 2008. "Migrants as second-class workers in urban China? A decomposition analysis," PSE Working Papers 2008-20, PSE (Ecole normale supérieure). [Downloadable!]
  9. Sylvie Démurger & Marc Gurgand & Li Shi & Yu Ximing, 2008. "Migrants as second-class workers in urban China? A decomposition analysis," Working Papers 0808, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
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