Stéphanie CarretDevelopment Workshop1 Globalization and Regional Income Inequality: Empirical evidence from within China Paper by Guanghua Wan, Ming Lu and Zhao Chen Stéphanie Carret Faculty of Economic Science University of Warsaw 22th October, 2009

Stéphanie CarretDevelopment Workshop2 The Planning for today 1.Review of the paper: main ideas 2.Analysis of illustrative graphs 3.Questions raised? « Spilled water is difficult to catch » Chinese Proverb

Stéphanie CarretDevelopment Workshop3 China ’ s geography  3d largest country  9M km2 (Poland, km2)  4,845 km ENE – WSW  3,350 km SSE – NNW  1.3 billion people in  23 Provinces  5 Autonomous Regions  4 Municipalities  2 Special Administrative Regions

Stéphanie CarretDevelopment Workshop4 Review of the paper: main ideas (1)  The authors examine the heat-debate about the impact of globalization (trade & liberalization) on inequality level  Empirical evidence with the case of China, an emergent country and power  Dataset: 29 regions between 1987 and 2001 (excluding HK, TW…)  Economists’ views on globalization impact  It increases inequality (Stiglitz)  It diminishes inequality (Ben David)  No relation with inequality (Sala i Martin)  U-shaped pattern for the inequality/trade function (Krugman)  Problematic of the paper:  How globalization and regional income inequality is related in China?  How much are they related?

Stéphanie CarretDevelopment Workshop5 Review of the paper: main ideas (2)  China’s insertion in globalization in a few facts & figures  Deng Xiaoping’s famous « get rich!» message at the end of the 70’s. « Doesn’t matter if the cat is black or grey; as long as it catches mice »  20 years of opening, largest FDI’s receiver and member of WTO since 2002  In 1994, trade (I/E) was almost completely deregulated  From rank 32 to 5 as trader in the world economy between 1978 and 2002  Chinese international trade in 2006 =$600billion, half of its GDP  Special Eco Zones and Open cities end 70’s: FDI flows

Stéphanie CarretDevelopment Workshop6  3 different regions in China: East, Centre and West  these regions experience different level in FDI, income, capital, privatization (see GDPs table)…  See Figure 1.1 for FDI and openness levels  Even if unified national policy:  different pace of globalization catching  Non economical factors: pre-dispositioned regions (coastal East and South), resources already available for FDI attraction, culture, local/regional governments… Review of the paper: main ideas (3)

Stéphanie CarretDevelopment Workshop7 Inequality at the country’s level  The residual contribution  Increase of Gini coeff

Stéphanie CarretDevelopment Workshop8 Analysis: What are the contributive factors to inequality?

Stéphanie CarretDevelopment Workshop9 Ranking of contributive factors, Gini Index

Stéphanie CarretDevelopment Workshop10 Conclusion & Questions  Solutions & Problems  More public investment in the lagging regions  Ease migration to the fast growing regions  Institutional innovation to improve the performance of fiscal decentralization: give fiscal advantages  Targeted social protection for the poorest classes  Development of financial market accross country: government’s measures  Promote FDI and trade in West and Central regions  Ethnical troubles  China has to deal constantly with the tackling of inequalities: SOCIAL PACT  The global rank of China in terms of inequality: a necessity during the emergence?

Stéphanie CarretDevelopment Workshop11 Source: Paper: “ Globalization and Regional Income Inequality: Empirical evidence from within China”, Paper by Guanghua Wan, Ming Lu and Zhao Chen

Stéphanie CarretDevelopment Workshop12 Questions? Thank you.