Poverty, Income Inequality, and Economic Growth in

China

Jiantuo YU

China Development Research Foundation

December, 2011

Contents

Multidimensional Poverty in China

Trend of Income Distribution

Implications for Economic Growth in the Future

1.Multidimensional Poverty in China

Why Multidimensional Perspective?

Dimensions and Indicators

Methodology & Data

Basic Results

Methodology & Data Alkire & Foster (2007)

CHNS 2000-2009

Dimensions and Indicators Dimensions

Indicators

Deprivation Cut-offs (The household is deprived if)

Weights

Income

Per capita

income of

household

Per capita income of the household less than RMB 1067 in

rural areas and less than RMB 2100 in urban areas in 2007,

adjusted according to prices in different waves and regions.

1

Health

Body Mass

Index (BMI)

At least one adult member of the household with BMI less

than 18.5 kg/m2

1

Education

Schooling

Years

All adult members’ schooling year is less than 5 years.

1

Security

Medical

Insurance

No any household member has access to any kind of

medical insurance

1

Living

Standard

Access to

Clean Water

No access to tap water in-house or in-yard

0.25

Access to

Improved

Sanitation

Facilities

No access to toilet facilities, no access to private restroom,

or using open earth pit as toilet

0.25

Access to

Electricity

Not using electricity as a main energy source for lighting

0.25

Access to

Improved

Cooking Fuel

Using wood, stick/straw, charcoal, etc. as main fuels for

cooking

0.25

Results Weighted

Number of

Deprivation

Dimensions (c)

Percentage of

the Poor in

2000

Percentage of

the Poor in

2004

Percentage of

the Poor in

2009

0

17.50%

22.10%

44.70%

0<c<1

9.43%

9.61%

23.81%

1≤c<2

48.45%

44.30%

26.10%

2≤c<3

20.05%

19.50%

4.65%

3≤c<4

4.23%

4.04%

0.69%

4≤c<5

0.33%

0.45%

0.05%

5

0.03%

0%

0%

Valid Sample

4000

4185

4322

0.005.0010.0015.0020.0025.0030.0035.0040.00

Jiangsu

Heilongjiang

Liaoning

Guangxi

Shandong

National

Henan

Hunan

Hubei

Guizhou

H0

2000

2004

2006

2009

0.000.020.040.060.080.100.120.140.160.180.20

Jiangsu

Liaoning

Heilongjiang

Guangxi

Shandong

National

HunanHenan

Hubei

Guizhou

M0

2000 2004 2006 2009

Headcount Ratio and Dimensional Adjusted Index of Multidimensional Poverty

051015202530354045

Educa

tion

Livin

g STD

Hea

lth

Inco

me

Soc.Sec

urity

Dimensional Contribution Rate

(%)

2000

2004

2006

2009

Decomposing Dimensional Contribution to Aggregate M0

Income

Education

Health

Social

Security

Living

Standard

ΔM0

Liaoning

21.62

2.82

25.16

41.97

8.42

0.0835

Heilongjian

g

22.04

0.67

17.31

41.85

18.13

0.0796

Jiangsu

17.06

12.97

7.64

49.61

12.71

0.0255

Shandong

25.72

9.78

9.63

40.29

14.58

0.0889

Henan

25.84

0.82

14.09

44.34

14.92

0.1123

Hubei

19.46

1.23

17.09

46.88

15.34

0.1129

Hunan

24.45

4.47

17.75

44.38

8.95

0.1080

Guangxi

5.71

-2.41

29.91

53.30

13.49

0.0577

Guizhou

11.69

-2.17

26.74

55.16

8.59

0.0984

Contribution Rate of Each Dimension to the Reduction of Provincial M0 (2000~2009) (%)

H0 and M0 in Urban and Rural Areas (k=2)

H0

M0

2000

2004

2009

2000

2004

2009

Urban

0.175

0.163

0.033

0.081

0.076

0.015

Rural

0.233

0.233

0.046

0.117

0.115

0.021

Rural/Urban

1.33

1.43

1.402

1.44

1.52

1.409

2. Trend of Income Inequality in China

Aggregate Income Inequality

Urban-rural inequality

Income Inequalities within urban and rural areas

Regional inequality

Grey Income

Aggregate Income Inequality

CDRF (2005, 2010)

Urban-rural inequality

Urban-rural income ratio

Income inequality within rural areas

Zhang Dongsheng (2010)

Rural Gini Coefficient

Income inequality within urban areas

Urban Gini Coefficient

Zhang Dongsheng (2010)

Re-estimated Urban Income Inequality

Urban Gini based on NBS Survey

Urban Gini based on Luo Chuliang (2010)

Trend of regional inequality

0.00

0.03

0.06

0.09

0.12

0.15

0.18

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

19841986198819901992199419961998200020022004200620082010

Theil_LGini

未加权Gini系数 人口加权Gini系数 Theil_L指数

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.00

0.03

0.06

0.09

0.12

0.15

0.18

0.21

19841986198819901992199419961998200020022004200620082010

Theil_LGini

未加权Gini系数 人口加权Gini系数 Theil_L指数

0.00

0.03

0.06

0.09

0.12

0.15

0.18

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

19841986198819901992199419961998200020022004200620082010

Theil_LGini

未加权Gini系数 人口加权Gini系数 Theil_L指数

Regional (provincial) inequality in consumption per capita

Regional (provincial) inequality in urban income Regional (provincial) inequality in rural income

Li Shantong et al. (2011)

Contributors to provincial income inequality

0.00

0.05

0.10

0.15

0.20

0.25

1984 1987 1990 1993 1996 1999 2002 2005 2008

农村—城市 农村—农村 城市—城市

83.3%

56.7%

Within Rural Within Urban Urban-rural

Li Shantong et al. (2011)

Grey Income Debate

Grey income was estimated as high as 5.4 trillion Yuan in 2010 (Wang Xiaolu, 2010)

Grey income is an issue to be concerned, but probably is not as serious as that estimated by Wang (Luo, Yue, and Li, 2010)

3. Implications for China’s

Economic Growth in the Future

Decreasing poverty, either in income poverty or multidimensional poverty, but

• Low standard of poverty line

• Less focus on other dimensions

• Less focus on Children poverty

•Segmentation of Policies

The income inequality probably has reached to a turning point, at least in some aspects, but Income inequality is still serious

It’s not sure whether the trend will be sustained?

Dramatic widening urban inequality

Will transfer schemes among regions and between rural and urban areas be affordable and sustainable?

Achieving a more equitable and sustainable economic growth

Improve human capital

Promote Urbanization

Growing middle class and structural change

Reform the factor market

Improving Productivity: Investment in Children and Human Capital

0 1 2 3 4 5 6 7 8 9 10

贫困发生率

%

图1. 中国农村不同年龄组人群贫困发生率

1998 2005

1998-2001年我国贫困县扶贫资金投向结构

文教卫生3%

工业14%

基础设施20%

农业46%

交通运输6%

技术培训1%

其它9%

商业服务业1%

技术培训

文教卫生

商业服务业

交通运输

工业

基础设施

农业

其它

CDRF (2007)

Urbanization and Economic Growth

0

5

10

15

20

25

30

35

40

45

50

1978年

1980年

1982年

1984年

1986年

1988年

1990年

1992年

1994年

1996年

1998年

2000年

2002年

2004年

2006年

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

城市化率(%) 人均GDP(元)

Yu (2010)

Challenging Reality

Disparity in Access to Social Security System Between

Urban Resident Employee and Migrant Workers (2009)

Scale of China’s urban middle group

Yu (2011)

Data: from CHIP (2008), calculated by the authors

Share of Middle Class at National Level:

YU & Huang (2011): 15%

CASS Survey: 23%

OECD : 11.7 %

Reform Factor Market

Labor market reform

Liberalize Interest rate and deregulate -exchange rate regime

Land reform

Marketize natural resources

Many Thanks

Jiantuo Yu

China Development Research Foundation

yujiantuo@hotmail.com

December, 2011