Smaller Real Regional Income Gap than Nominal Income Gap: A Price‐adjusted Study

Xiaojuan Jiang and Hui Li

China & World Economy, 2006, vol. 14, issue 3, 38-57

Abstract: Two factors determining the level of living in different areas are income level and price level. Current studies on regional gaps concentrate on the gap in income levels. The present paper studies the impact of the two variables on the real living standards in different regions, with the real gap in the living standards calculated with price adjustment by taking into consideration only the deviations brought about by cash income. The basic conclusion is that, despite China's economy having witnessed rapid growth, the statistics at the macro level cannot disguise the obvious gaps among regions; therefore, as a result of the impact of income and price, the real gap in the living standards among different regions is smaller than the gap indicated by the nominal income level. As people are sensitive to cash income level, they have a low sensitivity to changes in real purchasing power. In other words, in areas that have the same real income levels, people tend to think that people live better when the nominal income and price are both high. The differences in price indices among different regions show that the same cash income can get different goods and services in different regions. This explains the rationale of the existence of floating workers among different regions. On this basis, we predict that people working in high‐income areas who enjoy higher levels of social security might prefer to live in low‐price areas after retirement if the social security payment method becomes more flexible. (Edited by Xinyu Fan)

Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/j.1749-124X.2006.00021.x

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:bla:chinae:v:14:y:2006:i:3:p:38-57

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1671-2234

Access Statistics for this article

China & World Economy is currently edited by Yongding Yu

More articles in China & World Economy from Institute of World Economics and Politics, Chinese Academy of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().