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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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