The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural and Regional Income Gaps in China

Nora Lustig and Yang Wang
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Yang Wang: Institute of Economics and Finance, Nanjing Audit University, China

No 547, Working Papers from Center for Global Development

Abstract: China is characterized by high prefiscal overall, urban-rural and regional inequality. Applying standard fiscal incidence analysis, we estimate the redistributive effect of taxes and social spending on income distribution and poverty. In particular, we estimate the effect of direct and indirect taxes, direct cash transfers, contributory pensions, indirect subsidies, and in-kind transfers (education and health) on overall inequality and poverty, the urban-rural income gap, and income inequality between regions. The results show that the fiscal system is inequality-reducing overall and between regions. However, the urban-rural gap rises and the postfiscal headcount ratio is higher than prefiscal poverty in rural areas. Both are undesirable outcomes given that rural residents are poorer. They are largely explained by the considerably lower contributory pensions received by rural residents.

Keywords: Poverty and Inequality in China; Urban-Rural Gap; Regional Disparity; Taxes; Transfers; Incidence Analysis (search for similar items in EconPapers)
JEL-codes: D31 H22 I38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2020-09-10
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Related works:
Working Paper: The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural and Regional Income Gaps in China (2020)
Working Paper: The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural And Regional Income Gaps in China (2020)
Working Paper: The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural and Regional Income Gaps in China (2020)
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