Poverty and income inequality in China : urban-rural income disparity and migration in an era of economic reform

• Main Author: Jiandong, Chen
• Published: University of Manchester 2006
• Subjects: 339.2
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.632842

China is a typical dual economy. Thus, the author employs Lewis' dual-sector model as the theoretical framework to study Chinese income distribution. This thesis aims to investigate: (l) whether the dual-sector model can explain Chinese income inequality; (2) the trend of rural/urban income inequality in a dual economy; (3) the influence of migration on income distribution; (4) official rural poverty line setting, poverty county selection and the urban minimum living standard scheme (MLSS). Based on the systematic analysis of Chinese income inequality from 1978 to 2004, the influence of the intra-rural Gini ratio on the national Gini ratio is shown to have decreased, while the influence of the intra-urban Gini ratio on the national Gini ratio has increased. Compared with regional income disparity, the dominant issue in Chinese income inequality is the income gap between rural and urban areas. Chinese income disparity has worsened since economic transition, which to some extent follows Lewis' dual-sector model. However, the internal reasons for forming a dual economy in China are different from Lewis' hypothesis; the Chinese rural and urban income gap is much larger than under Lewis' assumption. If more attention is paid to agriculture, it is possible to avoid income disparity worsening in a dual economy. Due to the huge surplus of labour in rural areas, Chinese economic development is still in the first stage of Lewis' dual-sector model. According to the newly developed model, rural and urban income inequality in a dual economy will first rise then fall as the urban population increases. The income disparity between rural and urban areas will decline before Lewis' turning point. Owing to the dominant role of the rural and urban income gap in Chinese income disparity, Chinese income inequality will decline before fully absorbing surplus rural labour. In line with quantitative analysis, rural-to-urban migrants played a key role in intensifying Chinese rural and urban income inequality from 1978 to 2001. However, further rural-to-urban migration has had a positive influence on narrowing rural/urban income inequality. On the basis of statistical data, the government is found to have underestimated the rural poverty line; the real poverty ratio is much higher than official estimates indicate. The selection of poverty counties is not a precise way to target the rural poor. In the light of the case study and newly released data from MaCA, it is argued that the approach to setting the urban MLSS is questionable; the MLSS is highly constrained by local government budgets. Current MLSS excludes some real urban poor and rural migrants. Based on the above analysis, some suggestions are provided for policymakers ..