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Household Income Determination and Regional Income Differential in Rural China

  • Xin Meng
  • Harry X Wu

Regional income dispersion is a sensitive issue in China in terms of judging the impact of economic reform. This study looks closely at the issue as to what are the determinants of income variation among households in general, and which are the key determinants of income dispersion among different regions. The study uses the data from a sample survey on 1000 rural households in five Chinese provinces. Household income equations are estimated to assess the determinants of income variations among China’s rural households. Blinder’s (1973) decomposition approach is used to determine whether the regional income differential is mostly due to regional endowment differential or regional premium. Among other interesting findings, the major determinant of regional income dispersion seems to be the degree of regional marketisation. Moreover, the rate of return to most factors is significantly different across regions. These findings suggest that further economic reform in less developed regions and the open up of inter-regional trade and factor mobility are the most important factors in reducing the regional income differential

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Paper provided by University of Adelaide, Chinese Economies Research Centre in its series Chinese Economies Research Centre (CERC) Working Papers with number 1995-04.

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Date of creation: 1995
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Handle: RePEc:adl:cercwp:1995-04
Contact details of provider: Postal: Adelaide SA 5005
Phone: (618) 8303 5540
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Web page: http://www.adelaide.edu.au/cies/research/china/

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  1. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
  2. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  3. Datta, Gautam & Meerman, Jacob, 1980. "Household Income or Household Income Per Capita in Welfare Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 26(4), pages 401-18, December.
  4. Byron, Rayond P & Manaloto, Evelyn Q, 1990. "Returns to Education in China," Economic Development and Cultural Change, University of Chicago Press, vol. 38(4), pages 783-96, July.
  5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  6. Gregory, R. G. & Meng, Xin, 1995. "Wage Determination and Occupational Attainment in the Rural Industrial Sector of China," Journal of Comparative Economics, Elsevier, vol. 21(3), pages 353-374, December.
  7. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  8. Kuznets, Simon, 1976. " Demographic Aspects of the Size Distribution of Income: An Exploratory Essay," Economic Development and Cultural Change, University of Chicago Press, vol. 25(1), pages 1-94, October.
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