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Income and Consumption Inequality in Urban China: 1992-2003

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  • Hongbin Cai
  • Yuyu Chen
  • Li-An Zhou

Abstract

Using the nationally representative Urban Household Income and Expenditure Survey (UHIES) conducted by the National Bureau of Statistics (NBS) of China, we document a steadily rising trend in income and consumption inequality during the period from 1992 to 2003 in urban China. Despite the rising urban inequality over time, the social welfare of urban residents unambiguously improved because every income group saw their income and consumption increase over this period (higher income groups experienced faster increases). Moreover, consumption inequality follows income inequality very closely. Labor income inequality accounts for about two-thirds of total income inequality quite consistently over time. We find that only about one-third of urban inequality can be attributed to observable individual choices and characteristics, of which education has increasing explanatory power, while regional differences become less important over time. We also find that restructuring of the SOE sector, urbanization, and globalization are important contributing factors to rising overall urban inequality and the within-group inequality not accounted for by observable individual choices and characteristics. (c) 2010 by The University of Chicago. All rights reserved.

Suggested Citation

  • Hongbin Cai & Yuyu Chen & Li-An Zhou, 2010. "Income and Consumption Inequality in Urban China: 1992-2003," Economic Development and Cultural Change, University of Chicago Press, vol. 58(3), pages 385-413, April.
  • Handle: RePEc:ucp:ecdecc:v:58:y:2010:i:3:p:385-413
    DOI: 10.1086/650423
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    References listed on IDEAS

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    1. Lin, Justin Y & Wang, Gewei & Zhao, Yaohui, 2004. "Regional Inequality and Labor Transfers in China," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 587-603, April.
    2. Johnson, David & Shipp, Stephanie, 1997. "Trends in Inequality Using Consumption-Expenditures: The U.S. from 1960 to 1993," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(2), pages 133-152, June.
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    Cited by:

    1. Feng, Shuaizhang & Hu, Yingyao & Moffitt, Robert, 2017. "Long run trends in unemployment and labor force participation in urban China," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 304-324.
    2. Gradín, Carlos & Wu, Binbin, 2020. "Income and consumption inequality in China: A comparative approach with India," China Economic Review, Elsevier, vol. 62(C).
    3. Shi, Xiaojun & Wang, Hung-Jen & Xing, Chunbing, 2015. "The role of life insurance in an emerging economy: Human capital protection, assets allocation and social interaction," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 19-33.
    4. Chamon, Marcos & de Carvalho Filho, Irineu, 2014. "Consumption based estimates of urban Chinese growth," China Economic Review, Elsevier, vol. 29(C), pages 126-137.
    5. Xing, Chunbing & Li, Shi, 2012. "Residual wage inequality in urban China, 1995–2007," China Economic Review, Elsevier, vol. 23(2), pages 205-222.
    6. Quheng Deng & Bjorn Gustafsson, 2011. "A New Episode of Increased Urban Income Inequality in China," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201116, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    7. Jin, Hailong & Qian, Hang & Wang, Tong & Choi, E. Kwan, 2014. "Income distribution in urban China: An overlooked data inconsistency issue," China Economic Review, Elsevier, vol. 30(C), pages 383-396.
    8. Meng, Xin & Shen, Kailing & Xue, Sen, 2013. "Economic reform, education expansion, and earnings inequality for urban males in China, 1988–2009," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 227-244.
    9. Johansson, Anders C. & Wang, Xun, 2014. "Financial sector policies and income inequality," China Economic Review, Elsevier, vol. 31(C), pages 367-378.
    10. James Alm & Yongzheng Liu, 2014. "China's Tax-for-Fee Reform and Village Inequality," Oxford Development Studies, Taylor & Francis Journals, vol. 42(1), pages 38-64, March.
    11. Tsun Se Cheong & Yanrui Wu, 2013. "Globalization and Regional Inequality," Economics Discussion / Working Papers 13-10, The University of Western Australia, Department of Economics.
    12. Hung-Hao Chang, 2012. "Consumption inequality between farm and nonfarm households in Taiwan: a decomposition analysis of differences in distribution," Agricultural Economics, International Association of Agricultural Economists, vol. 43(5), pages 487-498, September.
    13. John Whalley & Chunbing Xing, 2010. "The Regional Distribution of Skill Premia in Urban China," NBER Working Papers 16575, National Bureau of Economic Research, Inc.
    14. Chen, Binkai & Liu, Dan & Lu, Ming, 2018. "City size, migration and urban inequality in China," China Economic Review, Elsevier, vol. 51(C), pages 42-58.
    15. Johansson, Anders C. & Wang, Xun, 2012. "Financial Sector Policies, Poverty and Inequality," Working Paper Series 2012-24, Stockholm School of Economics, China Economic Research Center.
    16. Bjorn Gustafsson & Sai Ding, 2011. "Unemployment and the Rising Number of Non-Workers in Urban China: Causes and Distributional Consequences," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201117, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    17. Juwei Zhang & Jing Xiang, 2014. "How Aging and Intergeneration Disparity Influence Consumption Inequality in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(3), pages 79-100, July.

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