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Explaining the changes of income distribution in China

  • Xu, Lixin Colin
  • Zou, Heng-fu

China has experienced one of the most remarkable increase in inequality over the last decade: the Gini coefficient increasing from 25.7 in 1984 to 37.8 in 1992. Using the recent developments in the theory of income distribution (Benerjee and Newman, 1993; Galor and Zeira, 1993) and a new panel data set about Chinese provincial-urban-level income inequality, this paper finds that inequality increased with the reduction of the share of state-owned enterprises in GDP, high inflation, growth, and (less significantly) the increasing exposure to foreign trade. We also find some evidence for the Director¡¯s Law: income redistribution tends to shift resources from the rich and the poor to the middle class. We do not find schooling and urbanization to be a significant explanatory factor.

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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 11 (2000)
Issue (Month): 2 (December)
Pages: 149-170

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Handle: RePEc:eee:chieco:v:11:y:2000:i:2:p:149-170
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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  1. Lyons, Thomas P, 1991. "Interprovincial Disparities in China: Output and Consumption, 1952-1987," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 471-506, April.
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  9. Hongyi Li & Heng-fu Zou, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," CEMA Working Papers 74, China Economics and Management Academy, Central University of Finance and Economics.
  10. Stigler, George J, 1970. "Director's Law of Public Income Redistribution," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 1-10, April.
  11. Caselli, F. & Ventura, J., 1996. "A Representative Consumer Theory of Distribution," Working papers 96-11, Massachusetts Institute of Technology (MIT), Department of Economics.
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  13. Atkinson, A B, 1997. "Bringing Income Distribution in from the Cold," Economic Journal, Royal Economic Society, vol. 107(441), pages 297-321, March.
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