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Regional Income Inequality in China: A Two-Stage Nested Inequality Decomposition Analysis

Takahiro Akita ()

No EMS_2001_05, Working Papers from Research Institute, International University of Japan

Abstract: This study estimates regional income inequality in China over the 1995-1998 period using a Theil index based upon district-level GDP and population data, and conducts a two-stage nested inequality decomposition analysis to explore the factors of regional income inequality. It also performs a regression analysis to explore the possible determinants of within-province income inequality. The decomposition analysis shows that the within-province inequality component accounted for 62 % of overall regional income inequality in 1998, while the between-region component contributed 27 %. According to the regression analysis, cumulative per capita FDI and a dummy variable designating inland border provinces are found to be significant in explaining within-province inequality. It is also found that economic dualism, as denoted by a low ratio of agricultural labor productivity to labor productivity in non-agricultural sectors, is another significant factor contributing to within-province inequality.

Keywords: China; regional income inequalities; two-stage inequality decomposition; foreign direct investment; economic dualism (search for similar items in EconPapers)
Pages: 31 pages
Date: 2001-10
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