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Explaining the Changes of Income Distribution in China

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  • Lixin Colin Xu

    (Development Research Group, the World Bank)

  • Heng-fu Zou

    (Guanghua School of Management, Peking University
    Institute for Advanced Study, Wuhan University
    Development Research Group, the World Bank)

Abstract

China has experienced one of the most remarkable increase in inequality over the last decade: the Gini coefficient increasing from 25.7 in 1984 to 37.8 in 1992. Using the recent developments in the theory of income distribution (Benerjee and Newman, 1993; Galor and Zeira, 1993) and a new panel data set about Chinese provincial-urban-level income inequality, this paper finds that inequality increased with the reduction of the share of state-owned enterprises in GDP, high inflation, growth, and (less significantly) the increasing exposure to foreign trade. We also find some evidence for the Director¡¯s Law: income redistribution tends to shift resources from the rich and the poor to the middle class. We do not find schooling and urbanization to be a significant explanatory factor.

Suggested Citation

  • Lixin Colin Xu & Heng-fu Zou, 2000. "Explaining the Changes of Income Distribution in China," CEMA Working Papers 473, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:473
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    References listed on IDEAS

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    Cited by:

    1. Almas Heshmati, 2006. "Continental And Sub-Continental Income Inequality," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 7-52, January.
    2. Xuemei Bai & Gang Li, 2004. "Industrial Productivity Convergence in China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 2(2), pages 155-168.
    3. Knight, John & Shi, Li & Renwei, Zhao, 2004. "Divergent Means and Convergent Inequality of Incomes among the Provinces and Cities of Urban China," WIDER Working Paper Series 052, World Institute for Development Economic Research (UNU-WIDER).
    4. Serhan Cevik & Carolina Correa-Caro, 2015. "Growing (Un)equal; Fiscal Policy and Income Inequality in China and BRIC+," IMF Working Papers 15/68, International Monetary Fund.
    5. Pedro H. Albuquerque, 2004. "Inequality-Driven Growth: Unveiling Aggregation Effects in Growth Equations," Econometric Society 2004 Far Eastern Meetings 769, Econometric Society.
    6. Guggiola Gabriele, 2009. "A Political Economy Perspective of the Chinese Government Tactical Behavior," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200908, University of Turin.
    7. Wei, Kailei & Yao, Shujie & Liu, Aying, 2008. "Foreign Direct Investment and Regional Inequality in China," WIDER Working Paper Series 094, World Institute for Development Economic Research (UNU-WIDER).
    8. Li, Yan & DaCosta, Maria N., 2013. "Transportation and income inequality in China: 1978–2007," Transportation Research Part A: Policy and Practice, Elsevier, vol. 55(C), pages 56-71.
    9. Yu CHEN & Sylvie DEMURGER & Martin FOURNIER, 2003. "Wage Differentials and Ownership Structure in Chinese Enterprises," Working Papers 200320, CERDI.
    10. Esfandiar Maasoumi & Le Wang, 2008. "Economic Reform, Growth and Convergence in China," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 128-154, 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. Damir Piplica, 2015. "Corruption and Political View Point of the Governments in Transition Countries EU Members," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(1), pages 73-87, January.
    13. Qinghua Zhang & Heng-fu Zou, 2012. "Regional Inequality in Contemporary China," Annals of Economics and Finance, Society for AEF, vol. 13(1), pages 113-137, May.
    14. Claudia Alvarez & David Urbano, 2008. "Entorno e Iniciativa Emprendedora: una Perspectiva Institucional," Working Papers 0807, Departament Empresa, Universitat Autònoma de Barcelona, revised Dec 2008.
    15. Ding, Ning & Wang, Yougui, 2008. "Household income mobility in China and its decomposition," China Economic Review, Elsevier, vol. 19(3), pages 373-380, September.
    16. Feng, Zhixin & Wang, Wenfei Winnie & Jones, Kelvyn & Li, Yaqing, 2012. "An exploratory multilevel analysis of income, income inequality and self-rated health of the elderly in China," Social Science & Medicine, Elsevier, vol. 75(12), pages 2481-2492.
    17. Lee, Wai Choi & Cheong, Tsun Se & Wu, Yanrui, 2017. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," ADBI Working Papers 651, Asian Development Bank Institute.
    18. Jiang, Minghua & Xu, Lixin Colin, 2005. "Medals in transition: explaining medal performance and inequality of Chinese provinces," Journal of Comparative Economics, Elsevier, vol. 33(1), pages 158-172, March.
    19. Rawski, Thomas G., 2001. "What is happening to China's GDP statistics?," China Economic Review, Elsevier, vol. 12(4), pages 347-354.
    20. Liming Yao & Michael White & Alla Koblyakova, 2015. "House price appreciation and housing affordability: a study of younger households tenure choice in China," ERES eres2015_44, European Real Estate Society (ERES).
    21. Binjian, Binjian & Sakamoto, Hiroshi, 2013. "Market Reform and Income Distribution in China : A CGE–Microsimulation Approach," AGI Working Paper Series 2013-13, Asian Growth Research Institute.
    22. Saccone Donatella, 2011. "Potenze economiche emergenti: Cina e India a confronto.Istruzione e diseguaglianze," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201113, University of Turin.
    23. Cathy Yang Liu & Wen Xie, 2013. "Creativity and Inequality: The Dual Path of China's Urban Economy?," Growth and Change, Wiley Blackwell, vol. 44(4), pages 608-630, December.
    24. Antonelli, Cristiano & Gehringer, Agnieszka, 2017. "Technological change, rent and income inequalities: A Schumpeterian approach," Technological Forecasting and Social Change, Elsevier, vol. 115(C), pages 85-98.

    More about this item

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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