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Income Inequality and Progressive Income Taxation in China and India, 1986-2015

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  • Thomas Piketty

    (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Nancy Qian

    (Brown University)

Abstract

This paper evaluates income tax reforms in China and India. The combination of fast income growth and under-indexed tax schedule in China implies the fraction of the Chinese population subject to income tax has increased from less than 0.1 percent in 1986 to about 20 percent in 2008, while it has stagnated around 2-3 percent in India. Chinese income tax revenues, as a share of GDP, increased from less than 0.1 percent in 1986 to about 1.5 percent in 2005 and 2.5 percent in 2008, while the constant adaptation of exemption levels and income brackets in India have caused them to stagnate around 0.5 percent of GDP.

Suggested Citation

  • Thomas Piketty & Nancy Qian, 2009. "Income Inequality and Progressive Income Taxation in China and India, 1986-2015," Post-Print halshs-00754381, HAL.
  • Handle: RePEc:hal:journl:halshs-00754381 DOI: 10.1257/app.1.2.53 Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754381
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    References listed on IDEAS

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    1. Thomas Piketty, 2003. "Income Inequality in France, 1901-1998," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1004-1042, October.
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    Cited by:

    1. Russell Smyth & Vinod Mishra & Xiaolei Qian, 2010. "Knowing One’s Lot in Life Versus Climbing the Social Ladder: The Formation of Redistributive Preferences in Urban China," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 96(2), pages 275-293, April.
    2. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, pages 3-71.
    3. Abhijit Banerjee & Xin Meng & Tommaso Porzio & Nancy Qian, 2014. "Aggregate Fertility and Household Savings: A General Equilibrium Analysis using Micro Data," Working Papers id:5799, eSocialSciences.
    4. Rao, Narasimha D., 2013. "Distributional impacts of climate change mitigation in Indian electricity: The influence of governance," Energy Policy, Elsevier, vol. 61(C), pages 1344-1356.
    5. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Sciences Po publications info:hdl:2441/4icc4hr7684, Sciences Po.
    6. Guangrong Ma & Jianwei Xu & Shi Li, 2015. "The Income Redistribution Effect Of China'S Personal Income Tax: What The Micro-Data Say," Contemporary Economic Policy, Western Economic Association International, vol. 33(3), pages 488-498, July.
    7. Sabina Alkire and Suman Seth, 2012. "Identifying BPL Households: A Comparison of Methods," OPHI Working Papers ophiwp054, Queen Elizabeth House, University of Oxford.
    8. Michal Brzezinski, 2011. "Variance Estimation for Richness Measures," LWS Working papers 11, LIS Cross-National Data Center in Luxembourg.
    9. Molero-Simarro, Ricardo, 2017. "Inequality in China revisited. The effect of functional distribution of income on urban top incomes, the urban-rural gap and the Gini index, 1978–2015," China Economic Review, Elsevier, vol. 42(C), pages 101-117.
    10. Jiang, Zhujun & Lin, Boqiang, 2014. "The perverse fossil fuel subsidies in China—The scale and effects," Energy, Elsevier, vol. 70(C), pages 411-419.
    11. Christian A. Belabed & Thomas Theobald & Till van Treeck, 2013. "Income Distribution and Current Account Imbalances," IMK Working Paper 126-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    12. Narasimha Rao, 2014. "International and intranational equity in sharing climate change mitigation burdens," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 14(2), pages 129-146, May.
    13. Cano Liliana, 2015. "Income Mobility in Ecuador: New Evidence from Individual Income Tax Returns," WIDER Working Paper Series 040, World Institute for Development Economic Research (UNU-WIDER).
    14. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
    15. Maoyong Fan & Zhen Lei & Gordon Liu, 2016. "Discounting of Medical Savings Accounts," American Journal of Health Economics, MIT Press, vol. 2(2), pages 161-183, Spring.
    16. A B Atkinson & Andrew Leigh, 2010. "The Distribution of Top Incomes in Five Anglo-Saxon Countries over the Twentieth Century," CEPR Discussion Papers 640, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    17. Brzezinski, Michal, 2013. "Asymptotic and bootstrap inference for top income shares," Economics Letters, Elsevier, vol. 120(1), pages 10-13.
    18. Bethencourt, Carlos & Kunze, Lars, 2016. "Temptation and the efficient taxation of education and labor," MPRA Paper 75141, University Library of Munich, Germany.
    19. Julia Cage & Lucie Gadenne, 2014. "Tax Revenues, Development, and the Fiscal Cost of Trade Liberalization, 1792-2006," Sciences Po publications info:hdl:2441/4icc4hr7684, Sciences Po.
    20. Sabina Alkire & Suman Seth, 2013. "Selecting a Targeting Method to Identify BPL Households in India," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 112(2), pages 417-446, June.
    21. Thomas Piketty & Emmanuel Saez, 2012. "Optimal Labor Income Taxation," NBER Working Papers 18521, National Bureau of Economic Research, Inc.
    22. Chen, Yuyu & Naidu, Suresh & Yu, Tinghua & Yuchtman, Noam, 2015. "Intergenerational mobility and institutional change in 20th century China," Explorations in Economic History, Elsevier, vol. 58(C), pages 44-73.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance

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