INCOME INEQUALITY IN URBAN CHINA AND THE ROLE OF STATE SECTOR

Jongchul Lee

Hitotsubashi Journal of Economics, 2013, vol. 54, issue 2, 159-176

Abstract: We tried to develop a two sector model to investigate the role of state sector on the urban income inequality in China.We showed that the state sector in the coastal provinces rather than the state sector in the interior provinces plays an important role in the income inequality in urban China.The findings of empirical analysis imply that the income inequality for urban households in China is mainly related to the coastal provinces with relatively higher return to capital, capital intensity, and thus capital income in the state sector.The Chinese government should redirect their policy that emphasizes the role of large enterprises in the state sector and subsidizes the capital in the capital-intensive state sector.The main reason for shifting from emphasizing the capital-intensive state sector to the labor-intensive private sector is to reduce inequality in the urban China.

Keywords: capital income; capital intensity; return to capital; urban income inequality (search for similar items in EconPapers)
JEL-codes: O18 O56 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:54:y:2013:i:2:p:159-176

DOI: 10.15057/26016

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