Economic Inequality and Poverty in PR China 20101105 BG

Report
Economic Inequality and
Poverty in P.R. China
Talk at Department of Social Work University
of Gothenburg
November 5, 2010
Björn Gustafsson, University of Gothenburg
Type of questions?
• Is China becoming more unequal?
• What explains changes (or lack of changes)?
• How unequal is China compared to other
countries?
• Which role do the urban to rural income gap play
for inequality in China?
• Has poverty in China been reduced?
• What role do public policy play for inequality and
poverty?
Publication
• Gustafsson, B., Li S.
and Sicular, T. (Eds)
(2008): ”Inequality
and Public Policy in
China”, Cambridge:
Cambridge University
Press. Chinese version
available.
• Journal articles,
Working Papers.
• We report results
from a project
collecting household
data for large parts of
rural as well as urban
China 2002.
• This was coordinated
with similar studies in
1988 and 1995.
• Now we analyze a
survey for 2007.
The approach
• Large surveys covering many
provinces in rural as well as urban
China.
• Data collected for 1988, 1995, 2002
and 2007.
• Collaborative research.
• Publications in English and Chinese.
The talk

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Context
Research method – data
Inequality
Poverty
Human capital and it’s formation
Concluding comments
Context – The 1950s
• Urban China: The
Soviet system was
introduced in urban
China.
• Work units (danwei) from the cradle to the
grave.
Planning.
No unemployment.
• Rural China:
Collectives.
• Increased education,
but low private
consumption.
• Underemployment.
Urban and rural China as two
different societies
• The hukou system separates effectively
since the beginning of 60s urban and rural
China.
• Very large differences between rural and
urban areas.
• Rural born and urban born persons faces
rather different life chances.
Transition towards a market
economy
• Rural China at the
end of the 70s.
• Family
responsibility
system.
• Initially increased
income.
• Urban China at the
beginning of the 80s.
• Markets for goods.
• Opening up the east
6th 5-year plan (1986
– 1990).
• Foreign trade and
foreign investments.
Rapid spatially
unbalanced economic
growth.
The hukou system has survived
• Possibilities for rural people to move to the
cities, although not having hukou –
Perhaps 140 million.
• Young manual workers. A segregated
labor market. Migrants work many hours,
many send back remittances.
• Permanent migrants: China’s unknown
migrants – around 100 million. Well
integrated.
Restructuring of work units in urban
China during the second part of the 90s
• Market allocation – firms
make losses which leads
to redundancy, lay offs
and unemployment.
• The transition from youth
to adulthood becomes
problematic.
• Early retirement
becomes common,
particularly among
women.
• From January 1996 to
November 2001 (ILO
Conventions):
• LFP – 8.6 %.
• Unemployment rates:
from 7.1 % to 12.5%.
• Employment rates:
- 12.2 %.
• Thereafter:
Improvements.
Large progress in collecting
household data for China. Different
methods
Researcher
initialized
strategy.
 Use of data
collected by NBS.
 The combined
strategy.


See Gustafsson, B.
and Li, S. (2006)
”Three Ways to
Obtain Household
Income Data” in
Heimer, M. and
Thogersen, S.
(Eds) Doing
Fieldwork in China,
NIAS Press.
Researcher initialized strategy
• The researcher
formulates research
questions, design and
planning fieldwork,
supervise fieldwork,
coding, data cleaning
and finally analyses.
• Can lead to high
quality data that fit the
research questions.
• Requires long term
commitment and
resources.
• Difficult to apply if
trying to study large
parts of China or
changes over time.
Use of data collected by National
Bureau of Statistics
• Division of labour:
The researcher
concentrates on
analysis.
• The ideal: Impartial,
high quality data that
fits research
questions well and
are easy to access.
• Has potential to study
differences across
large territory as well
as changes over time.
* Which questions are
asked?
• Access?
• Quality?
NBS system for collecting
household data
• One rural survey, one urban survey.
• Sampling: several stages.
• One problem: Rural people living in urban
areas are not in the sampling frame.
• Sampled households are followed for
more than one year, they keep detailed
records and are visited by assisting
enumerators.
• Problems of non response in urban areas.
The combined strategy to collect
household data for China
• Researchers
formulate questions,
make some cleaning
and analyzes.
• NBS is responsible
for the fieldwork.
• Not a single
researcher project.
• Questions to
respondents can
match research
questions.
• Coverage over space
and over time.
• Access.
• Requires good
relations with NBS.
Examples of the combined
strategy – CHIP
• The surveys for 1988,
1995, (1999) and
2002.
• Basically the same
design all years.
• 8 000 – 10 000 rural
households each
survey.
• 7 000 – 9 000 urban
households each
survey.
• In 2002 also:
One survey of 2 000
rural households
living in urban areas
without hukou.
One survey to cadre in
the 961 administrative
villages where rural
households live.
A closer look at design. Number of
provinces covered in three studies.
1988
1995
2002
Rural
sample
28
19
22
Urban
sample
10
11
12
Migrant
sample
12
Books
• Griffin and Zhao (1993) The Distribution of
Income in China.
• Riskin, Zhao and Li (2001) China’s Retreat from
Inequality.
• Khan and Riskin (2001) Inequality and Poverty
in China in the Age of Globalization.
• Li and Sato (2006) Unemployment, Inequality
and Poverty in Urban China.
• Gustafsson, Li and Sicular (2008) Inequality and
Public Policy in China.
• A new book in preparation.
Inequality
Variables:
 Earnings in
urban China.
 Wealth.
 Income.

Changes over
time – increase?
 Levels –
compare with
other countries.
 Urban vs rural.

Changes in real earnings in
urban China
• Average wages
increased by 58
percent from 1995 to
2002.
• This corresponds to
an annual increase of
6.8 percent.
• The Gini increased
from
22.9 percent in 1988.
30.7 percent in 1995.
to
37.0 percent in 2002.
Gender differences in the urban
labour market
• Increased negative effect
of being a women on
wages.
A wage function analysis
controlling for age,
education etc show
increased effect:
- 10 percent in 1995.
- 16 percent in 2002.
- 26 percent in 2007.
• Women more often
than men were in
2002 non-employed.
As a consequence are
married women more
dependent on their
men’s income than
earlier.
Income dependency among
couples
Country and
year
Women
has no
earnings
%
Women
earns less
than men
%
Equality in Women
Women
earnings % earns more sole earner
(40 – 60 %) than men
%
%
Sweden 1995
8.7
57.9
15.5
12.3
5.5
Germany
1994
33.5
39.2
9.6
6.3
11.5
Netherlands
1994
39.8
41.2
7.6
2.5
7.8
Urban China
1995
1.0
32.2
59.9
7.9
0.1
Urban China
2002
7.6
40.5
38.7
12.0
1.2
The distribution of wealth in rural
China
• Components in 2002:
Housing
43 %
User to land
31%
Financial assets 12 %
Rest
14 %
• Rather equally
distributed, but
becoming more
unequal.
Ginis:
• 1988: 31.1 %
• 1995: 35.1 %
• 2002: 39.9 %
Wealth in urban China
• Composition in 2002
Housing
64 %
Financial assets 26%
Durables
7%
• More unequal than in
rural China, but did
not become more
unequal between
1995 and 2002.
Housing reform took
place during the 90s.
Often benefited earlier
tenants.
• Ginis:
1995 50 %
2002 48 %
A international comparison of
wealth inequality
Country
Year
Gini coefficient
Percent
USA
(West) Germany
Canada
1983
1988
1984
79
69
69
Italy
Japan
Sweden
China as a whole
1987
1984
1985
1995
60
52
59
40
Urban China
Rural China
1995
1995
50
33
We now turn to income
• Income is not only
earnings but also
possibilities to
consume farm
products, imputed
rents of owner
occupied housing and
transfers.
• Income measured at
the household level.
• We adjust for
household size
• We use individuals as
unit of analysis
Income inequality
Income inequality in entire China =
Income inequality in urban China
+ Income inequality in rural China
+ Between urban and rural inequality
[if we use a additively decomposable index]
Gini coefficients in 2002. Percent
Urban China
32
Rural China
37
China as a whole
47
0
.05
.1
.15
Income growth in urban China 1995/1988,
2002/1995 and 2007/2002. Annual changes
0
20
40
60
80
Percentile
1988-1995
2002-2007
1995-2002
100
Comments on urban income
inequality
• Housing reform took
place gradually and
the best off
households had
already benefited in
1995.
- Once for all effect.
•
Most urban elderly
enjoy pensions.
A large fraction live in
separate households
and are not under
privileged.
• Employment in
private enterprises
have increased, as
has selfemployment.
Annual changes in real income for various
deciles in rural China 1988 / 1995, 2002/ 1995
Figure 2a: Growth for deciles 1988/1995 and 2002/1995 -- rural area
14
12
Growth rate (%)
10
1995/1988
8
2002/1995
6
4
2
0
1
2
3
4
5
6
Deciles
7
8
9
10
Comments on rural income
inequality
• Very much of rural
income inequality is
spatial.
For example much
more than in India.
Differences in mean
income across :
regions, provinces,
and counties.
• Between 1995 and
2002 did differences
in mean income
between provinces in
the east diminish.
Economic growth has
spilled over within the
eastern region.
Annual changes in real income for various
deciles China as a whole 1988 / 1995, 2002/
1995
Figure 1: Growth in income for deciles for the period
1988/1995 and 2002/1995
14
12
Growth rate (%)
10
1995/1988
2002/1995
8
6
4
2
0
1
2
3
4
5
6
Decile
7
8
9
10
Comments on income inequality
in China as a whole
• Income inequality is
high by international
standards.
• It has not increased,
nor decreased
between 1995 and
2002.
• Very much of income
inequality in China is
spatial.
If Chinas provinces
were countries (HDI):
Shanghai and Beijing
similar to Greece and
Hungary.
Guizhou and Tibet like
Morocco and
Namibia.
Urban to rural inequality
1988
1995
2002
Urbanization
rate
26 %
29%
39%
Urban to rural
income gap
2.7
3.1
3.1
Between urban
to rural
inequality as %
of total
inequality
37%
41%
46%
Comments on the rural to urban
income inequality
• The urban to rural
• There are very large
income gap is large in
incentives for rural
international
people to urbanize.
comparison.
• Urban people are
• How to deal with the
better educated, but
large migration
this can only explain a
pressure is a very big
smaller part of the
issue.
gap.
Poverty

Rural poverty
Has been very large.
After first reforms did it
decrease rapidly.
1988 to 95 vas a period
of disappointing
development but later
new progress.

Urban poverty
From very low to a new
problem.
Rural poverty
• According to World
Bank: China has the
second largest
poverty population in
the world. (Under 1
USD PPP person and
day).
• Very large reductions
following the first
reforms.
Changes 1988 to 1995.
No reductions in the
west.
If considering
expenditures on
education and fee, no
progress.
From 1995 to 2002:
General reductions.
Rural poverty policy in PRC
Government designated
poor areas (counties).
Measures are targeted
to the poor areas.
Not a policy targeting
poor households.
• Problems:
Leakage: Non- poor (>
50 percent of
inhabitants in poor
areas) benefit.
Under coverage:
Measures do not
reach poor living
elsewhere.
The definition of poverty in rural
China
• Official poverty line is
lower than 1 USD
PPP. 627 Yuan per
person and day (in
2002) .
• ”Low income line”,
similar to 1 USD. 879
Yuan per person and
day).
• What does the
population think?
The SPL methodology.
We find that the answer
depends on where
one lives.
• Guizhou 1 016 Y
• Zheijang 1 741 Y
The extent of rural poverty in
China
• Poverty rates
according to:
World Bank in 2001:
16.6 percent.
Gustafsson and Yue
(2006) for 2002: 15.3
percent.
• Examples for 2002:
Eastern region: 10 %.
Western region: 21 %.
Jiangsu 4 %.
Guizhou 33 %.
Poor areas 31 %.
Non poor areas 10 %.
Ethnic minorities are disproportional
located to rural western China
• PRC recognizes
Hahn and 55 ethnic
minorities.
• Ethnic minorities
make up 8.4 percent
of the population –
104 million persons.
• Typically minorities
live in villages
inhabited with other
minority persons.
• Between 1988 and
1995 did the minority
– majority gap
increase rapidly.
• Minorities have higher
poverty rates than the
majority.
• Minority villages in the
south-west have
rather low income.
Poverty among rural to urban
migrants
How to conceptualise (and measure)?
Refer to rural or urban population? – Do
they need less money than residents?
Access to public services and housing
- Do they need more money than residents?
How to consider that they work many hours?
- Several would have been considered poor
if working as many hours as residents.
Poverty among urban residents
affected by joblessness
• In our urban data
from 2002 were:
8 percent of persons in
the Labor force are
unemployed.
22 percent lived in a
household with at
least one member
unemployed.
• Implications:
- Income from working
household members
are rather important
for alleviating poverty.
- Joblessness affect
many urbanites.
Individual consequences of
joblessness
• Re-employment, but wage losses
compared to others (scaring).
• Receive early retirement benefits.
• Receive Unemployment Insurance
Benefits.
• Xia gang – keeping ties with the work unit.
Now phased out.
• Need for a new safety net.
Di Bao – Social assistance
• Existing local
programs were put in
a new legal frame in
1999.
Households can apply.
Income and asset tests.
SA line differ by city, on
average:
1 872 Yuan a year and
person in 2005.
• Number of household
receiving increased
from 2 million in 1998
to 22 million in 2002.
• 3.7 percent of urban
residents (migrants
are not entitled).
(Sweden 2005 4.5 percent)
Comments on Dia Bao
• Di Bao receipt closely linked to
joblessness (which vary by city) and lack
of financial assets.
• Well-targeted, alleviate poverty for many,
but often to small to make the households
people live in cross the poverty line.
Human capital and human
capital formation

Education and
Schooling.
Large increases in
the education level
of the population.



Health and health
care.
Large increases in
life expectancy
(due to economic
growth).
Education
• Clear evidences of
• Rates of return to
increased rates of
education was low
return to education:
during the planning
- For earnings in the
period.
labour market
- For household
income.
- To escape rural
poverty.
Incentives to have a long
education have increased.
Schools requires fees.
Further: To put a child
through school can
means loss of family
income.
Importance of parental
background for adult
success has probably
increased.
Compare the chances
of a:
- urban boy living in
eastern China having
longer educated
parents.
- minority girl living in
the west having low
educated parents.
Health and health care
• Most rural households • Problems:
are not covered by
health insurance.
- Under-use.
• Rural health care is
mainly paid out of
pocket.
- Risk for economic
collapse for
households.
Funding of health care in PRC
• Many urban people
receive
disbursements of
health expenditures
from work units.
• PRC rates very low
among countries
when WHO rate
fairness in health
finance.
• The better off
urbanites (particularly
in the east) benefit
dissproportionally
from subsidies to
health care.
• Systems of reform of
health care funding in
rural China on the
agenda.
Concluding comments


China is becoming
more unequal
according to many
indicators.
But this is not a
continuous
process.


Compared to other
countries is the
distribution of
income in China is
rather unequal.
But this is not (yet)
the case for the
distribution of
household wealth.
Spatial factors are rather
important for inequality in China
• Rural to urban gap is
a very largest issue.
• How to address the
urban to rural divide is
a very big issue – the
hukou system.
• Inequality in China
would almost half if
mean urban income is • Large migration
equal to mean rural
pressure.
income.
Poverty in China has changed
• Rural poverty has
decreased
impressively, but still
exist.
• Urban poverty has
appeared due to:
- In-migration of rural
inhabitants.
- Structural change
leading to
joblessness.
Some global consequences of
Chinas rapid income growth
• Inequality in
• World poverty
income among
has decreased.
inhabitants in the
world has
reduced.

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