Redistributive Effect of Taxes and Transfers: Evidence from China

Liu Baihui

Journal of Tax Reform, 2017, vol. 3, issue 1, 43-51

Abstract: China’s sustained high-speed several-decade-long economic growth has raised the level of per capita income, but also brought about a serious income gap. Taxes and public transfers are main policy governmental tools in the process of redistribution. This paper leads a comprehensive analysis of the impacts of taxes and transfers on income redistribution using decomposition method and is based on China’s Urban Household Survey Data (2002–2009) derived from the National Bureau of Statistics of China. The empirical results reveal that government’s net transfer reduces urban household’s increasing market income inequality, and the improvement effect increases with time. Taking a closer look, it shows that both tax and transfer play positive adjusting roles. Transfer’s contribution is relatively larger, reflected mainly in the improvement of horizontal equality, while tax’s effect is mainly reflected in vertical equality. On the whole, the combined redistribution effect of personal income tax and social insurance expenses from residents to government is positive, and can play a role in regulating the income redistribution. Endowment insurance, social relief and unemployment insurance reduce inequality in the transfers of government to residents, even though the last two items’ effects are very weak. In contrast, provident fund expands income gap. The conclusions reached in this paper will refer to the refinement of income distribution reform, promotion of tax reform, and improvement of the social security system.

Keywords: tax revenue and expenditure; income redistribution; vertical equality; horizontal equality (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://jtr.urfu.ru/fileadmin/user_upload/site_15907/main/Liu.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:3:y:2017:i:1:p:43-51

DOI: 10.15826/jtr.2017.3.1.030

Access Statistics for this article

Journal of Tax Reform is currently edited by Igor Mayburov

More articles in Journal of Tax Reform from Graduate School of Economics and Management, Ural Federal University Contact information at EDIRC.
Bibliographic data for series maintained by Natalia Starodubets ().