Markets, Human Capital, and Inequality: Evidence from Rural China

Dwayne Benjamin (dwayne.benjamin@utoronto.ca), Loren Brandt (loren.brandt@utoronto.ca), Paul Glewwe and Li Guo

No 298, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Market reforms are generally credited with the rapid growth enjoyed by China's rural sector. This growth has not been without some cost, however, as inequality has also increased. Estimates suggest that the Gini rose from less than 0.20 to over 0.40 during this period. In this paper we go behind these numbers to explore the nature and causes of this inequality. To begin, we find that a considerable share of rural inequality is driven by local differences in household incomes, as opposed to regional income differences, that have been the focus of the previous literature. We then examine inter-household income differentials at the village level, exploring the links between education, market development, non-agricultural employment, and household income. To address these questions, we draw on a recently collected data set from Northeast China, that was collected by two of the authors in collaboration with Chinese colleagues in Hebei and Liaoning provinces in 1995. For purposes of comparison, we also draw on the Chinese Health and Nutrition Survey. We find that indeed, increasing rates of return to education and unevenly developed non-agricultural business opportunities contribute to the high levels of inequality in the countryside. Of most interest, however, is the implication that simultaneous improvements in educational attainment and off-farm market-development would allow more households to share in the rapid growth in rural China.

JEL-codes: D3 O15 P00 (search for similar items in EconPapers)
Pages: pages
Date: 2000-01-01
New Economics Papers: this item is included in nep-dev and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Chapter: Markets, Human Capital and Inequality: Evidence from Rural China (2002)
Working Paper: Markets, Human Capital, and Inequality: Evidence from Rural China (2000)
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