Rural Economy Outcomes in China After Two Decades of Policy Reform

This article surveys the major rural policy changes that have occurred in China over the past two decades and analyses the results from national surveys to obtain a picture of the changes in rural labour allocation, income and poverty levels, and income inequality over the period 1991-2011. We find that there has been a dramatic shift in labour allocation out of agriculture and into industrial wage employment. As a result, average real earnings grew significantly over the period. Summary measures of income inequality, such as the Gini coefficient, indicate that the distribution of rural earnings became more unequal in the 1990s but that this trend was reversed in the 2000s. More disaggregated data, including all income sources, show that, in the 1990s, the growth of income increased by income decile. This explains the increasing income inequality over the decade. In the 2000s, income growth by income decile was more equal, although the incomes of the top decile grew at twice the rate of those in the bottom decile. The policy changes that contributed to these different outcomes in the 1990s and 2000s are documented.