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A Tale of Transition; An Empirical Analysis of Economic Inequality in Urban China, 1986–2009

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  • Haiyan Ding
  • Hui He

Abstract

This paper is the first comprehensive empirical study of earnings, income, and consumption inequality in urban China from 1986 to 2009, using unique micro-level data from the Urban Household Survey (UHS). The paper documents a drastic increase in economic inequality for the sample period. The paper finds that consumption inequality closely tracks income inequality, both over time and over the life cycle. The paper believes that the main driver of this co-movement could be a dramatic increase in noninsurable idiosyncratic permanent income shocks after the early 1990s, associated with the economic transition in urban China.

Suggested Citation

  • Haiyan Ding & Hui He, 2016. "A Tale of Transition; An Empirical Analysis of Economic Inequality in Urban China, 1986–2009," IMF Working Papers 16/239, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/239
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    References listed on IDEAS

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    1. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 295-366.
    2. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 295-366.
    3. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    4. Yu Zheng & Raul Santaeulalia, 2016. "The Price of Growth: Consumption Insurance in China 1989-2009," 2016 Meeting Papers 826, Society for Economic Dynamics.
    5. Shang-Jin Wei & Xiaobo Zhang, 2011. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 511-564.
    6. Yuriy Gorodnichenko & Klara Sabirianova Peter & Dmitriy Stolyarov, 2010. "Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 209-237, January.
    7. Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2002. "Labor retrenchment in China: Determinants and consequences," China Economic Review, Elsevier, vol. 13(2-3), pages 252-275.
    8. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    9. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
    10. Shuaizhang Feng & Yingyao Hu & Robert Moffitt, 2015. "Long Run Trends in Unemployment and Labor Force Participation in China," Working Papers id:7279, eSocialSciences.
    11. Jeremy Lise & Nao Sudo & Michio Suzuki & Ken Yamada & Tomoaki Yamada, 2014. "Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 582-612, October.
    12. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," NBER Working Papers 21006, National Bureau of Economic Research, Inc.
    13. Orazio Attanasio & Erik Hurst & Luigi Pistaferri, 2012. "The Evolution of Income, Consumption, and Leisure Inequality in The US, 1980-2010," NBER Working Papers 17982, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Longmei Zhang, 2016. "Rebalancing in China—Progress and Prospects," IMF Working Papers 16/183, International Monetary Fund.
    2. repec:rnp:ecopol:ep1802 is not listed on IDEAS
    3. Sonali Jain-Chandra & Tidiane Kinda & Kalpana Kochhar & Shi Piao & Johanna Schauer, 2016. "Sharing the Growth Dividend; Analysis of Inequality in Asia," IMF Working Papers 16/48, International Monetary Fund.
    4. Higgins, Patrick & Zha, Tao & Zhong, Wenna, 2016. "Forecasting China's economic growth and inflation," China Economic Review, Elsevier, vol. 41(C), pages 46-61.

    More about this item

    Keywords

    Time series; China; People's Republic of; Consumption distribution; Transition economies; Income distribution; China; Asia and Pacific; Household expenditures; Household survey data; Income inequality; Inequality over time and life-cycle; Income dynamics; Chinese economy; Structural transformation; Inequality over time and life-cycle; Income dynamics; Chinese economy; Structural transformation; Personal Income and Wealth Distribution;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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