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Urbanization and Income Inequality in China: An Empirical Investigation at Provincial Level

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  • Dongjie Wu

    (University of Queensland)

  • Prasada Rao

    (University of Queensland)

Abstract

Trends in inequality in China suggest that there has been a significant increase in inequality in the distribution of income from around 0.30 in 1980 to 0.55 in 2012. Research over the last two decades has focused on identifying the main drivers of the increase in inequality. The main objective of this paper is to examine the relationship between urbanization and income inequality in China using provincial level data over the period 1987–2010. Using a panel of data for 20 provinces collected from the Chinese Statistical Yearbooks for five selected years. The empirical analysis based on OLS, fixed and random effects models, show a robust inverted-U relationship between inequality and urbanization. A threshold rate of urbanization of 0.53 has been identified with the implication that provinces with levels of urbanization higher than the threshold will experience reductions in income inequality. The second objective of the paper investigates the role of urbanization and the rural–urban wage differential on provincial inequality. Based on data from a representative cross-section of six provinces covering the period 1987–2005, we find that well-developed or income rich regions tend to have lower rural–urban inequality and higher migrant inflows and the rural–urban wage gap make significant contributions to income inequality.

Suggested Citation

  • Dongjie Wu & Prasada Rao, 2017. "Urbanization and Income Inequality in China: An Empirical Investigation at Provincial Level," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(1), pages 189-214, March.
    • Handle: RePEc:spr:soinre:v:131:y:2017:i:1:d:10.1007_s11205-016-1229-1
    DOI: 10.1007/s11205-016-1229-1
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    4. Ibrahim Mohamed Ali Ali & Imed Attiaoui & Rabeh Khalfaoui & Aviral Kumar Tiwari, 2022. "The Effect of Urbanization and Industrialization on Income Inequality: An Analysis Based on the Method of Moments Quantile Regression," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(1), pages 29-50, May.
    5. Wai Choi Lee & Tsun Se Cheong & Yanrui Wu & Jianxin Wu, 2019. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," Asian Economic Papers, MIT Press, vol. 18(2), pages 126-141, Summer.
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    7. Xiaohua Chen & Xinyi Zhang & Yuhua Song & Xueping Liang & Liangjun Wang & Yina Geng, 2020. "Fiscal Decentralization, Urban-Rural Income Gap, and Tourism," Sustainability, MDPI, vol. 12(24), pages 1-14, December.
    8. He, Ming & Chen, Yang & van Marrewijk, Charles, 2021. "The effects of urban transformation on productivity spillovers in China," Economic Modelling, Elsevier, vol. 95(C), pages 473-488.
    9. Nai Chiek Aik & Qiurui Zhang, 2023. "Use of Theil for a Specific Duality Economy: Assessing the Impact of Digital Inclusive Finance on Urban-Rural Income Gap in Chongqing," FinTech, MDPI, vol. 2(4), pages 1-12, September.
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    11. Wang, Siliang & Tan, Shukui & Yang, Shengfu & Lin, Qiaowen & Zhang, Lu, 2019. "Urban-biased land development policy and the urban-rural income gap: Evidence from Hubei Province, China," Land Use Policy, Elsevier, vol. 87(C).
    12. Yong Liu & Cuihong Long, 2021. "Urban and Rural Income Gap: Does Urban Spatial Form Matter in China?," SAGE Open, , vol. 11(1), pages 21582440211, March.
    13. Xiangxiang Zhang & Hong Liu & Danyang Wang, 2023. "Relative Poverty Scale Measurement and Trend Analysis Between Provinces in China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(1), pages 629-645, September.
    14. Feng Wang & Wenna Fan & Xiangyan Lin & Juan Liu & Xin Ye, 2020. "Does Population Mobility Contribute to Urbanization Convergence? Empirical Evidence from Three Major Urban Agglomerations in China," Sustainability, MDPI, vol. 12(2), pages 1-20, January.
    15. Fateh Saci, 2024. "The Impact of Financial Liberalization Policies on Income Inequality," Journal of Economic Analysis, Anser Press, vol. 3(1), pages 99-117, March.
    16. Chu Li & Jinming Yan & Ze Xu, 2021. "How Does New-Type Urbanization Affect the Subjective Well-Being of Urban and Rural Residents? Evidence from 28 Provinces of China," Sustainability, MDPI, vol. 13(23), pages 1-17, November.
    17. Xiejun Cheng & Min Zhang & Jiayi Xu & Jingrong Xu & Decai Tang, 2023. "Research on the Impact of Sustainable Urbanization on Urban Rural Income Disparity in China," Sustainability, MDPI, vol. 15(6), pages 1-12, March.
    18. Yang, Tingru & Li, Hui & Zhang, Lingyue & Chen, Tianqi, 2022. "The impact of city gas on income inequality in China: A regional heterogeneity analysis," Energy Policy, Elsevier, vol. 169(C).

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    More about this item

    Keywords

    Urbanization; Income inequality; Gini coefficient; Rural–urban wage gap;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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