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Inequality and Poverty in China during Reform

Author

Listed:
  • Sangui Wang
  • Dwayne Benjamin
  • Loren Brandt
  • John Giles
  • Yingxing Li
  • Yun Li

Abstract

This paper provides an overview of the evolution of income inequality and poverty in China from 1987 to 2002, documenting significant increases of inequality within China's urban and rural populations. In rural areas, increased inequality is primarily related to the disequalizing role of non-agricultural self-employment income and the slow growth in agricultural income from the mid-1990s onward. Poverty persists, and tied in part to slow growth in agricultural commodity prices. In urban areas, the declining role of subsidies and entitlements, the increase in wage inequality, and the layoffs during restructuring have fueled the growth in inequality within urban areas. Poverty levels, however, are very low. China should give more emphasis on education, training, and other human development efforts in its poverty reduction strategy since return to education increased rapidly and became a major source of inequality. A nationwide "social safety net" and an effective redistributive taxation system should be adopted and implemented to ensure that the poor can benefit from the fruits of rapid economic growth.

Suggested Citation

  • Sangui Wang & Dwayne Benjamin & Loren Brandt & John Giles & Yingxing Li & Yun Li, 2007. "Inequality and Poverty in China during Reform," Working Papers PMMA 2007-07, PEP-PMMA.
  • Handle: RePEc:lvl:pmmacr:2007-07
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    File URL: https://portal.pep-net.org/documents/download/id/13542
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    References listed on IDEAS

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    1. Keith Griffin & Azizur Rahman Khan & Carl Riskin, 1999. "Income Distribution in Urban China during the Period of Economic Reform and Globalization," American Economic Review, American Economic Association, vol. 89(2), pages 296-300, May.
    2. Dwayne Benjamin & Loren Brandt & Paul Glewwe & Guo Li, 2002. "Markets, Human Capital and Inequality: Evidence from Rural China," International Economic Association Series, in: Richard B. Freeman (ed.), Inequality Around the World, chapter 5, pages 87-127, Palgrave Macmillan.
    3. Gustafsson, Bjorn & Li, Shi, 2004. "Expenditures on education and health care and poverty in rural China," China Economic Review, Elsevier, vol. 15(3), pages 292-301.
    4. Benjamin, Dwayne & Brandt, Loren & Giles, John, 2005. "The Evolution of Income Inequality in Rural China," Economic Development and Cultural Change, University of Chicago Press, vol. 53(4), pages 769-824, July.
    5. Rawski, Thomas G., 1982. "The Simple Arithmetic of Chinese Income Distribution," Economic Review, Hitotsubashi University, vol. 33(1), pages 12-26, January.
    6. Loren Brandt & Dwayne Benjamin, 1999. "Markets and Inequality in Rural China: Parallels with the Past," American Economic Review, American Economic Association, vol. 89(2), pages 292-295, May.
    7. Anthony F. Shorrocks, 1983. "The Impact of Income Components on the Distribution of Family Incomes," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 311-326.
    8. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. World Bank, 2012. "Well Begun, Not Yet Done : Vietnam's Remarkable Progress on Poverty Reduction and the Emerging Challenges," World Bank Publications - Reports 12326, The World Bank Group.
    2. Wang, Xiaojun & Fleisher, Belton M. & Li, Haizheng & Li, Shi, 2014. "Access to college and heterogeneous returns to education in China," Economics of Education Review, Elsevier, vol. 42(C), pages 78-92.
    3. Almås, Ingvild & Johnsen, Åshild Auglænd, 2012. "The cost of living in China: Implications for inequality and poverty," Discussion Paper Series in Economics 21/2012, Norwegian School of Economics, Department of Economics.
    4. Zhai, Fan & Hertel, Thomas W., 2009. "Economic and Poverty Impacts of Agricultural, Trade and Factor Market Reforms in China," Agricultural Distortions Working Paper Series 52787, World Bank.
    5. Adams, Samuel & Klobodu, Edem Kwame Mensah, 2017. "Capital flows and the distribution of income in sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 169-178.
    6. Shijun Ding & Laura Meriluoto & W. Robert Reed & Daoyun Tao & Haitao Wu, 2010. "The Impact of Agricultural Technology Adoption of Income Inequality in Rural China," Working Papers in Economics 10/41, University of Canterbury, Department of Economics and Finance.
    7. Fu, Rao & Jin, Gui & Chen, Jinyue & Ye, Yuyao, 2021. "The effects of poverty alleviation investment on carbon emissions in China based on the multiregional input–output model," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    8. Thomas Gries & Manfred Kraft & Manuel Simon, 2016. "Explaining inter-provincial migration in China," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 709-731, November.
    9. Valerie Kozel, 2014. "Well Begun but Not Yet Done : Progress and Emerging Challenges for Poverty Reduction in Vietnam," World Bank Publications - Books, The World Bank Group, number 20074.
    10. Wang, Xiaojun & Fleisher, Belton M. & Li, Haizheng & Li, Shi, 2007. "Access to Higher Education and Inequality: The Chinese Experiment," IZA Discussion Papers 2823, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Income inequality; poverty; welfare; growth; reform; transition; policy; China;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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