Terry Sicular

The Urban-Rural Income Gap and Inequality in China

Using new household survey data for 1995 and 2002, we investigate the size of Chinas urban-rural income gap, the gaps contribution to overall inequality in China, and the factors underlying the gap. Our analysis improves on past estimates by using a fuller measure of income, adjusting for spatial price differences and including migrants. Our methods include inequality decomposition by population subgroup and the Oaxaca-Blinder decomposition. Several key findings emerge. First, the adjustments substantially reduce Chinas urban-rural income gap and its contribution to inequality. Nevertheless, the gap remains large and has increased somewhat over time. Second, after controlling for household characteristics, location of residence remains the most important factor underlying the urban-rural income gap. The only household characteristic that contributes substantially to the gap is education. Differences in the endowments of, and returns to, other household characteristics such as family size and composition, landholdings, and Communist Party membership are relatively unimportant. Copyright

Plan and Market in China's Agricultural Commerce

This article examines interactions between markets and state commercial planning in the context of Chinas agricultural sector. It begins with a discussion of recent trends in agricultural planning and commerce in China and then presents a theoretical model that analyzes the way that a mixed commercial system of the sort observed in China functions. The theoretical analysis suggests that a mixed system is sustainable and can have desirable efficiency and distributional effects. Markets, however, limit the range of sustainable plans, and in the presence of markets, state planning may no longer directly influence production and consumption behavior.

Moving toward markets? Labor allocation in rural China

Abstract Chinas economic reforms have brought rapid growth in rural off-farm employment, raising questions about the assumption that rural China is labor surplus and has poorly functioning factor markets. We investigate this by testing for separability between household labor demand and supply using panel data. We find that separability is rejected overall, indicating that factor markets remain underdeveloped. Nonseparability, however, is associated with labor surplus in some areas and labor shortage in others. Moreover, separability holds where substantial employment opportunities exist in the wider township, suggesting that such employment promotes competitive allocation within villages as well as the inter-village movement of resources.

Redefining State, Plan and Market: China's Reforms in Agricultural Commerce *

Since the late 1970s the Chinese government has taken major steps to open up domestic markets and promote the development of commerce. Policies during the reform period have included reducing the scope of commercial planning, eliminating state commercial monopolies, and permitting individuals, collectives and enterprises to buy and sell at mutually acceptable, market-based prices. The effects of such measures are evident in the busy retail districts of Chinas cities and in the lively market fairs in the countryside.

Politics, Growth, and Inequality in Rural China: Does it Pay to Join the Party?

Economic reform is often constrained because rank-and-file bureaucrats responsible for implementation have vested interests that oppose change. Drawing on an unusual longitudinal survey data set for a representative rural county in northern China, we show an alternative, positive scenario consistent with the presence of an implicit, performance-based incentive contract that ties the household incomes of local officials to market liberalization, increases in consumer demand, and the provision of local public goods. The mechanisms appear to be tolerated as the fruits of growth are shared fairly equitably, thus allowing implementation of a politically and economically self-reinforcing reform process.

Agricultural Planning and Pricing in the Post-Mao Period *

During the past decade Chinas leaders have called repeatedly for reductions in administrative interventions in the economy, for greater reliance on economic “levers,” for decentralization of economic decision-making, and for an increased role of markets. Although the need for liberalization is fairly widely accepted, debate over how far and how fast to proceed has continued. One view initially proposed by Chen Yun sees China moving towards a system where a “planned economy is primary, and markets are supplementary” ( jihua jingji wei zhu, shichang tiaojie wei bu ). Others advocate moving beyond Chen Yuns vision to a system where, in fact if not in name, allocation takes place primarily through markets. Li Pengs government work report to the first session of the Seventh National Peoples Congress suggests that the current consensus leans towards the latter, more progressive view: The focus of reform of the planning system is to transform the function of state planning organs, gradually reduce mandatory planning and expand guidance planning, … use economic instruments, and gradually establish a new economic mechanism where “the state regulates markets, and markets guide enterprises” ( guojia tiaojie shichang, shichang yindao qiye ).

Rising inequality in China : challenges to a harmonious society

1. Introduction: rising inequality in China Li Shi, Hiroshi Sato and Terry Sicular 2. Overview: income inequality and poverty in China, 2002-7 Li Shi, Luo Chuliang and Terry Sicular 3. Housing ownership, incomes, and inequality in China, 2002-7 Hiroshi Sato, Terry Sicular and Yue Ximing 4. Educational inequality in China: the intergenerational dimension John Knight, Terry Sicular and Yue Ximing 5. Inequality and poverty in rural China Luo Chuliang and Terry Sicular 6. The evolution of the migrant labor market in China, 2002-7 John Knight, Deng Quheng and Li Shi 7. A new episode of increased urban income inequality in China Deng Quheng and Bjoern Gustafsson 8. Unemployment and the rising number of non-workers in urban China: causes and distributional consequences Bjoern Gustafsson and Ding Sai 9. Do employees in the public sector still enjoy earnings advantages? Yang Juan, Sylvie Demurger and Li Shi 10. Redistributive impacts of personal income tax in urban China Xu Jing and Yue Ximing 11. Changes in the gender wage gap in urban China, 1995-2007 Li Shi and Song Jin 12. Inter-temporal changes in ethnic urban earnings disparities in China Ding Sai, Li Shi and Samuel L. Myers, Jr Appendix I. The 2007 household surveys: sampling methods and data description Luo Chuliang, Li Shi, Terry Sicular, Deng Quheng and Yue Ximing Appendix II. The 2002 and 2007 CHIP surveys: sampling, weights, and combining the urban, rural, and migrant samples Song Jin, Terry Sicular and Yue Ximing.

The Distribution of Household Income in China: Inequality, Poverty and Policies*

This article examines recent trends in inequality and poverty and the effects of distributional policies in China. After a discussion of data and measurement issues, we present evidence on national, as well as rural and urban, inequality and poverty. We critically examine a selection of policies pursued during the Hu–Wen decade that had explicit distributional objectives: the individual income tax, the elimination of agricultural taxes and fees, minimum wage policies, the relaxation of restrictions on rural–urban migration, the minimum living standard guarantee programme, the “open up the west” development strategy, and the development-oriented rural poverty reduction programme. Despite these policies, income inequality in China increased substantially from the mid-1990s through to 2008. Although inequality stabilized after 2008, the level of inequality remained moderately high by international standards. The ongoing urban–rural income gap and rapid growth in income from private assets and wealth have contributed to these trends in inequality. Policies relaxing restrictions on rural–urban migration have moderated inequality. Our review of selected distributional policies suggests that not all policy measures have been equally effective in ameliorating inequality and poverty.

The Distribution of Wealth in China

Introduction Chinas reform and openness have now been ongoing for a quarter century. During this important period, while Chinas economy has developed rapidly and personal incomes have increased, changes in income distribution, especially rising income inequality, have raised social concerns. Income and wealth are closely correlated. The peoples well-being depends not only on incomes but also on the level and distribution of wealth (Schneider 2004, pp. vii, 6). Since 1990 China has experienced a period of rapid accumulation of personal wealth combined with unequal distribution of that wealth. The country has established the objective of constructing a well-off society. The issue of wealth distribution thus has become a new focus of concern. In this chapter wealth, also called property or assets, includes land, housing, and individual savings or holdings of other financial instruments, among other factors. Here the terms wealth, property, and assets are used as synonyms, but in different ways and from different points of view. When we link these assets with ownership we use the term “property rights.” Wealth and income are different concepts. Here income refers to all earnings of a person or a household in a certain period of time (usually a year). Wealth refers to the net monetary value of all assets at a certain point of time. In other words, wealth is the stock of all property at a certain point, while income is a flow of earnings in a time period. Obviously, income and wealth are interrelated.

Grain Pricing: A Key Link in Chinese Economic Policy

In China, as in other countries, grain prices act as a link between consumers and producers and across economic sectors. Higher grain prices can raise farm incomes, but they reduce the purchasing power of consumers. By encouraging production and discouraging consumption, they can also reduce the need for imports. In addition, grain prices can alter the flow of resources between industry and agriculture. Grain pricing thus influences the rate and composition of economic growth, the level and distribution of income, economic stability, and national selfreliance. Consequently, implicit in grain price policy are choices among the national economic objectives of growth, equity, stability, and national security. An examination of grain pricing in China reveals an additional linkage. In China a close relationship exists between food pricing, including grain pricing, and public finance. In Chinas socialized economy, the profits and losses of industrial and commercial enterprises have, at least until recently, entered directly into the state budget. Through its effects on enterprise profitability, then, agricultural pricing influences state revenues and expenditures. Chinas price policies, by keeping the prices of agricultural products low relative to industrial products, have enhanced industrial profitability and thus benefited state coffers. At the