IDEAS home Printed from
   My bibliography  Save this paper

Impact of Changes in Social Institutions on Income Inequality in China


  • Hiroko Uchimura


This paper analyses the impact of changes in social institutions, i.e. in the informal and formal social security system, on income inequality in China. This study uses an inequality decomposition analysis approach comparing household survey data for 1988 with 1995. Since 1992 was a decisive year for accelerating to increase the role of market mechanism in China, comparing these two periods shows significant changes in social institutions and their impacts on income inequality. It provides meaningful implications for inequality issues in the present China. In a first step the paper looks at the impact of changes in the family based social security system on income inequality. Secondly, the paper investigates the contribution of current social security system reforms as a potential tool to cope with increasing inequality. Three main results emerge from the analysis: first, the family based social security is losing its importance mainly through the changes in employment pattern in a household. This change has a significant impact on income inequality. Second, this study shows that the introduction of new formal social security system helped to equalise the distribution of retired household members’ income in urban areas. Third, however, these changes have only benefited a restricted number of persons. Benefits for rural migrants are low and most of the rural population has still no access to the new system. Important steps forward will be to raise the fund-pooling level, and to include nonfarming workers into the new system. Ce document analyse l’impact des changements survenus dans les institutions sociales chinoises — à savoir le système de sécurité sociale formelle et informelle — sur l’inégalité des revenus. L’auteur procède à une décomposition des inégalités en comparant des données d’enquêtes auprès des ménages réalisées en 1988 et en 1995. L’année 1992 ayant marqué un tournant décisif en Chine, avec le rôle accru des mécanismes de marché, la comparaison de ces deux périodes fait apparaître des évolutions sensibles au sein des institutions sociales et met en évidence leurs conséquences en matière d’inégalité des revenus. Cette analyse comparative apporte un éclairage utile sur les problématiques actuelles d’inégalités en Chine. Elle s’intéresse tout d’abord aux conséquences de ces évolutions sur l’inégalité des revenus dans le système de sécurité sociale fondé sur la famille. Elle s’attache ensuite à la contribution potentielle des réformes du système de sécurité sociale pour faire face aux inégalités croissantes. Trois grands résultats émergent de cette recherche : i) le système de sécurité sociale fondé sur la famille perd de son importance, du fait notamment de l’évolution de la structure des emplois au sein des ménages, qui aggrave nettement l’inégalité des revenus ; ii) l’introduction d’un nouveau système de sécurité sociale formelle favorise l’égalisation des revenus des membres retraités dans les ménages urbains ; iii) mais ces évolutions n’ont profité qu’à un nombre restreint d’individus. Les bénéfices pour les migrants des zones rurales sont faibles et, pour l’essentiel, la population rurale n’a toujours pas accès à ce nouveau système. Deux mesures contribueront à améliorer la situation — l’augmentation du niveau des fonds gérés en commun et l’intégration des travailleurs non agricoles dans le nouveau système.

Suggested Citation

  • Hiroko Uchimura, 2005. "Impact of Changes in Social Institutions on Income Inequality in China," OECD Development Centre Working Papers 243, OECD Publishing.
  • Handle: RePEc:oec:devaaa:243-en

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, pages 473-500.
    2. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    3. Reisen, Helmut, 2003. "Ratings since the Asian crisis," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1790.
    4. Kumar, Manmohan S & Persaud, Avinash, 2002. "Pure Contagion and Investors' Shifting Risk Appetite: Analytical Issues and Empirical Evidence," International Finance, Wiley Blackwell, vol. 5(3), pages 401-436, Winter.
    5. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 133-170 National Bureau of Economic Research, Inc.
    6. Calvo, Guillermo A. & Mendoza, Enrique G., 1996. "Mexico's balance-of-payments crisis: a chronicle of a death foretold," Journal of International Economics, Elsevier, pages 235-264.
    7. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
    8. Jeffrey A. Frankel & Nouriel Roubini, 2001. "The Role of Industrial Country Policies in Emerging Market Crises," NBER Working Papers 8634, National Bureau of Economic Research, Inc.
    9. Ronald McKinnon & Gunther Schnabl, 2004. "The Return to Soft Dollar Pegging in East Asia: Mitigating Conflicted Virtue," International Finance, Wiley Blackwell, vol. 7(2), pages 169-201, July.
    10. Hsiao, Frank S. T. & Hsiao, Mei-chu W. & Yamashita, Akio, 2003. "The impact of the US economy on the Asia-Pacific region: does it matter?," Journal of Asian Economics, Elsevier, pages 219-241.
    11. Rudiger Dornbusch, 1985. "Policy and Performance Links between LDC Debtors and Industrial Nations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 303-368.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oec:devaaa:243-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.