China: Class 5 The Distribution of Well-Being within China

Good source q Kahn and Riskin Income and inequality in China, China Quarterly.

Data sources q Two household sample surveys conducted by an international team of economists using standard international definitions. q 1988 (20,000 households) q 1995 (15,000 households) q definition of “income” is disposable income, net of taxes. Tried to be comprehensive (e.g. housing subsidies)

Rural Households

Urban Households

Income distribution q Gini index. Higher the value the greater the inequality q Contribution to inequality of an income source. Will depend on: q distribution of that income source q size of that income source relative to total income q Fraction of total income to different decile groups

Rural Income Inequality,

Urban income inequality

Summary Gini indexes. China (1995).452 China (1988).382 Thailand.462 Malaysia.484 Philippines.407 Brazil.634 Mexico.503 Chile.565

Regional Inequality within China

Major Chinese Regions

Two basic measures of the level of regional economic inequality are typically used Standard Deviation--a measure of the ABSOLUTE level of inequality Coefficient of Variation (V)

Background Considerations q Inheritance of lop-sided economy q strong commitment to more balanced distribution of productive capital and income q substantial redeployment of productive capacity q >2,000 large enterprises established in West and Central China ( ) q efficiency sacrificed for equity

Provincial and regional CVs for per capita income pre reform period

Why the increasing regional inequality??? A lot of investment was modestly productive Chinese ‘Price Scissors’ policy –deliberately underpriced energy, agriculture and other primary goods –poor provinces were natural resource based –price policy transferred profit/income out of these regions

q emphasis has shifted to efficiency q UNDP’s Human Development Report (1994) expresses concern about excessively large regional gaps. Since 1978

Regional Inequality Good source: Wang and Hu The Political Economy of Uneven Development: The Case of China.

q The Province is the basic unit of analysis q constitute functional, economic, administrative and political units q Two separate analyses. With and without Beijing, Shanghai and Tianjin. 3 major metro. areas. q per capita GDP is primary indicator of regional economic welfare q use region-specific GDP deflators to express values consistently in 1978 yuan.

q 1978 provincial per capita GDP values range from 46% to 179% of national average. q 1994 values range from 43% to 176%. q In both periods, B,S,T are totally off the scale (250% to 650% of the national average) q Clear regional patterning espec. in All the high income provinces (120%+) are in the Eastern Region.

Trends in the level of regional inequality?

Excluding Beijing, Shanghai,Tianjin

Using a relative measure

With and without metro areas

INTERNATIONAL COMPARISONS India U.S. Portugal Japan France Spain China (without BST)

Alternative indicators of well- being