Explaining the Changes of Income Distribution in China

Lixin Xu and Heng-Fu Zou ()

No 473, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: China has experienced one of the most remarkable increase in inequality over the last decade: the Gini coefficient increasing from 25.7 in 1984 to 37.8 in 1992. Using the recent developments in the theory of income distribution (Benerjee and Newman, 1993; Galor and Zeira, 1993) and a new panel data set about Chinese provincial-urban-level income inequality, this paper finds that inequality increased with the reduction of the share of state-owned enterprises in GDP, high inflation, growth, and (less significantly) the increasing exposure to foreign trade. We also find some evidence for the Director¡¯s Law: income redistribution tends to shift resources from the rich and the poor to the middle class. We do not find schooling and urbanization to be a significant explanatory factor.

Pages: 41 pages
Date: 2000
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Citations: View citations in EconPapers (38)

Published in China Economic Review, Volume 11, Issue 2, December 2000, Pages 149-170

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