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Globalization and the Urban Poor in China

  • Zhang, Yin
  • Wan, Guanghua

This paper examines the distributional impact of globalization on the poor in urban China. Employing the kernel density estimation technique, we recovered from irregularly grouped household survey data the income distributions of 29 Chinese provinces for 1988–2001. Panels of the income shares of the poorest 20, 10 and 5 per cent of the urban residents were then compiled. In a fixed-effect model, two of the central conclusions of Dollar and Kraay (2002) – that ‘the incomes of the poor rise equi-proportionately with average income’ and that trade openness has little distributional effect on poverty – were revisited. Our results lend little support to either of the Dollar-Kraay conclusions, but instead indicate that average income growth is associated with worsening income distribution while globalization in general, and trade openness in particular, raises the income shares of the poor. It is also found that openness to trade and openness to FDI have differential distributional effects. The beneficial effect of trade was not restricted to the coastal provinces, but weakened significantly after 1992. These findings are robust to allowing for nonlinearity in the effect of globalization and to controlling for the influence of several other variables.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number RP2006/42.

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Length: 28 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:unu:wpaper:rp2006-42
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  1. Xavier Sala-i-Martin, 2002. "The Disturbing "Rise" of Global Income Inequality," NBER Working Papers 8904, National Bureau of Economic Research, Inc.
  2. Spilimbergo, Antonio & Londono, Juan Luis & Szekely, Miguel, 1999. "Income distribution, factor endowments, and trade openness," Journal of Development Economics, Elsevier, vol. 59(1), pages 77-101, June.
  3. Ming Lu & Guanghua Wan & Zhao Chen, 2010. "Globalization and Regional Income Inequality: Evidence from within China," Working Papers id:3179, eSocialSciences.
  4. Loren BRANDT & Carsten A HOLZ, 2005. "Spatial Price Differences in China: Estimates and Implications," Development and Comp Systems 0504010, EconWPA.
  5. Ravallion, Martin, 2001. "Growth, inequality, and poverty : looking beyond averages," Policy Research Working Paper Series 2558, The World Bank.
  6. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
  7. Ravallion, Martin, 2003. "Inequality convergence," Economics Letters, Elsevier, vol. 80(3), pages 351-356, September.
  8. Sylvie Demurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy and Regional Development in China," Harvard Institute of Economic Research Working Papers 1950, Harvard - Institute of Economic Research.
  9. repec:oup:restud:v:72:y:2005:i:3:p:707-734 is not listed on IDEAS
  10. Jordi Galí & Tommaso Monacelli, 2004. "Monetary policy and exchange rate volatility in a small open economy," Economics Working Papers 835, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Martin Ravallion, 2010. "Looking Beyond Averages in the Trade and Poverty Debate," Working Papers id:3258, eSocialSciences.
  12. repec:idb:brikps:6803 is not listed on IDEAS
  13. Easterly, William & Fischer, Stanley, 2000. "Inflation and the poor," Policy Research Working Paper Series 2335, The World Bank.
  14. Antonio Spilimbergo & Juan Luis Londoño & Miguel Székely, 1997. "Income Distribution, Factor Endowments, and Trade Openness," Research Department Publications 4088, .
  15. Branko Milanovic, 2003. "The Ricardian Vice: Why Sala-i-Martin’s calculations of world income inequality are wrong," HEW 0305003, EconWPA.
  16. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
  17. 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.
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