Income inequality and privatisation: a multilevel analysis comparing prefectural size of private sectors in Western China

Abstract

In 2000, the Chinese government initiated a campaign to develop Western China and reduce local and regional inequality. Privatisation has been a central component of the campaign. This article studies the relationship between privatisation and income inequality in Western China, based on survey data from 11 Western provinces collected between 2004 and 2005. This study first explores the link between privatisation and income inequality at the prefecture level, investigating whether a higher degree of privatisation can be linked to increased income inequality. Using multilevel random coefficient modelling, it then studies whether the impact of an individual's socioeconomic position on their income varies across regions with different degrees of privatisation. The final part presents simulations of economic inequality based on the random slope model. The study shows that income inequality is higher in regions with higher degrees of privatisation, and larger privatisation correlates with lower individual income. Furthermore, the study confirms that individual income is strongly affected by education, occupation, employment sector and household registration status. Income differences based on these factors do not vary with the level of privatisation; however, a finding that contradicts market transition theory in the context of Western China.

Toward an Empirical Analysis of Income and Time Poverty in Urban China

“…However, both the state-owned sector and the non-state-owned sectors are important components of the social market economy. Many earlier studies have highlighted that state ownership and private ownership are associated with income inequality (Bakkeli, 2017; Wu and Yao, 2015). Consequently, this study was undertaken to examine the relation between diversity of ownership sectors and gaps of working time and income gap in Urban China.…”