Income Inequality during China's Economic Transition

Abstract

This paper provides an overview of the evolution of income inequality in China from 1987 to 2002, employing three series of data sets. Our focus is on both urban and rural inequality, as well as the urbanrural gap, with the objective of summarizing several "first-order" empirical patterns concerning the trajectory of inequality through the reform period. We document 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 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. We find that spatial (regional) dimensions of inequality are significant, but are much less important than commonly believed for both the urban and rural populations, and for differences between urban and rural areas. Accounting for urban-rural reclassification, which otherwise exaggerates the rising urban-rural gap, we find a relatively stable ratio of urban to rural incomes. This hides some geographical variation, however: The urban-rural gap is increasing more rapidly in interior provinces, where SOE's had a more dominant role in economic activity in urban areas, than in coastal provinces where the non-state sector was more important earlier in the reform period.

Urban income inequality in China revisited (1988–2002)

“…Indeed, inequality computed from nondeflated income is between 7% and 20% higher than that observed for deflated income 9 . This issue, which has already been documented by 10 and Benjamin, Brandt, Giles and Wang (2005) 11 on different periods and databases is confirmed here for urban household disposable income using the CHIP data. It provides per se a major motivation to use regional price deflators in any analysis of income inequality in China.…”

Growth with equity: income inequality in Vietnam, 2002–14

“…10 These issues including sampling, representativeness, definitions of household membership, price di↵erences, etc. are taken up in Benjamin, Brandt, Giles, and Wang (2008). Some of these issues are also taken up in Li, Sato and Sicular (2013).…”

The Fundamental Institutions of China's Reforms and Development

“…It is commonly agreed in the literature that inequality in China has substantially worsened since the reforms, mainly in the past two decades. Based on household data from nine provinces, Dwayne Benjamin et al (2008) find that the overall (combined urban-rural) Gini coefficient of China probably exceeds 0.50, which is approaching that of some of the most unequal countries in the world, e.g., South America. Based on provincial level aggregate data, Ravi Kanbur and Zhang (2005) found that, associated with the increase of GDP and trade, the Gini coefficient has increased from 0.29 in 1978 to 0.37 in 2000.…”