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Spatial Price Differences in China: Estimates and Implications

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Author Info
Loren Brandt (University of Toronto)
Carsten 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 Microeconomics with number 0512001.

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Length: 50 pages
Date of creation: 02 Dec 2005
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Handle: RePEc:wpa:wuwpmi:0512001

Note: Type of Document - pdf; pages: 50
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Related research
Keywords: spatial deflators; inequality; income differences; regional absolute price levels; China;

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Find related papers by JEL classification:
D3 - Microeconomics - - Distribution
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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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)
    Other versions:
  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)
    Other versions:
  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)
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  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:
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  1. Fleisher, Belton M. & Li, Haizheng & Zhao, Min Qiang, 2008. "Human Capital, Economic Growth, and Regional Inequality in China," IZA Discussion Papers 3576, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Yin Zhang & Guanghua Wan, 2006. "Globalization and the Urban Poor in China," Discussion Papers 196, University of Dundee, Economic Studies. [Downloadable!]
    Other versions:
  3. Branko Milanovic, 2005. "Global Income Inequality: What It Is And Why It Matters?," HEW 0512001, EconWPA. [Downloadable!]
    Other versions:
  4. 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!]
  5. Chotikapanich, Duangkamon & Prasada Rao, D.S. & Tang, KamKi, 2006. "Estimating Income Inequality in China Using Grouped Data and the Generalized Beta Distribution," Working Papers RP2006/134, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  6. Sylvie Démurger & Martin Fournier & Shi Li & Zhong Wei, 2008. "Economic liberalization with rising segmentation in China's urban labor market," Post-Print halshs-00353336_v1, HAL. [Downloadable!]
    Other versions:
  7. Gustafsson, Björn & Sai, Ding, 2008. "Temporary and Persistent Poverty among Ethnic Minorities and the Majority in Rural China," IZA Discussion Papers 3791, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Sylvie Demurger & Marc Gurgand & Li Shi & Yue Ximing, 2008. "Migrants as second-class workers in urban China? A decomposition analysis," Post-Print halshs-00269119_v1, HAL. [Downloadable!]
    Other versions:
  9. 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!]
  10. 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!]
    Other versions:
  11. Qu, Zhaopeng (Frank) & Zhao, Zhong, 2008. "Urban-Rural Consumption Inequality in China from 1988 to 2002: Evidence from Quantile Regression Decomposition," IZA Discussion Papers 3659, Institute for the Study of Labor (IZA). [Downloadable!]
  12. 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!]
    Other versions:
  13. Angus Deaton & Alan Heston, 2008. "Understanding PPPs and PPP-based national accounts," NBER Working Papers 14499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Sicular, Terry & Yue, Ximing & Gustafsson, Bjorn & Li, Shi, 2006. "The Urban-Rural Income Gap and Inequality in China," Working Papers RP2006/135, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
    Other versions:
  15. Zhang, Yin & Wan, Guanghua, 2006. "Poverty Reduction in China: Trends and Causes," Working Papers RP2006/152, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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