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Household Income Determination and Regional Income Differential in Rural China

Author

Listed:
  • Xin Meng
  • Harry X Wu

Abstract

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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Suggested Citation

  • Xin Meng & Harry X Wu, 1995. "Household Income Determination and Regional Income Differential in Rural China," Chinese Economies Research Centre (CERC) Working Papers 1995-04, University of Adelaide, Chinese Economies Research Centre.
    • Handle: RePEc:adl:cercwp:1995-04
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    Cited by:

    1. Lee, Soohyung & Malin, Benjamin A., 2013. "Education's role in China's structural transformation," Journal of Development Economics, Elsevier, vol. 101(C), pages 148-166.
    2. Shan Jordan, 2002. "A Macroeconometric Model of Income Disparity in China," International Economic Journal, Taylor & Francis Journals, vol. 16(2), pages 47-63.
    3. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
    4. Wu, Harry X. & Meng, Xin, 1996. "Do Chinese farmers reinvest in grain production?," China Economic Review, Elsevier, vol. 7(2), pages 123-134.
    5. Xiaoyun Liu & Terry Sicular, 2009. "Nonagricultural Employment Determinants and Income Inequality Decomposition," Chinese Economy, Taylor & Francis Journals, vol. 42(4), pages 29-43, July.
    6. Ulrich Reuter, 2006. "What Kind of Education Does China Need?: The Impact of Educational Attainment on Local Growth and Disparities," WIDER Working Paper Series RP2006-127, World Institute for Development Economic Research (UNU-WIDER).
    7. Yanrui Wu, 2000. "Income disparity and convergence in China's regional economies," Chapters, in: P. J. Lloyd & Xiao-guang Zhang (ed.), China in the Global Economy, chapter 15, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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