OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
A Pause in the Growth of Inequality in China?
In recent years, policymaking in China has put increasing emphasis on stemming the growth in inequality,
which had been fairly steep since the 1980s. Policy action has taken the form of regional development measures and
of reforms of various aspects of the social safety net broadly defined. The Western Development Plan has aimed at
narrowing the income gap between the sparsely populated and under-developed West and the more prosperous and
faster-growing East. The bulk of the expenditure, however, has been on large capital-intensive projects rather than on
education and other social spending. More emphasis on education would help reduce the income gap, since human
capital is a key determinant of income. Government policies to improve conditions in rural areas nationwide have
involved a substantial reduction in the burden of regressive taxes and fees. Welfare assistance has also evolved: a
minimum living allowance has been introduced in urban and more recently in rural areas, but it has not reduced
poverty that much, not least because of how it is administered. Moreover, the financing of this allowance ought to
rely more on national solidarity and its delivery needs to be better co-ordinated with that of other social benefits. A
set of new indicators of nationwide inequality, based on household survey data, suggests that overall inequality has
ceased to increase in recent years, and may even have inched down. Alternative measures of income inequality across
provinces show that, if migration is taken into account, disparities are markedly less, and have tended to decline
somewhat in recent years. Even so, geographical inequality remains very high by international standards. It reflects
intra- more than inter-provincial differences, pointing to persistent, if diminishing, labour market segmentation.
Keywords: poverty, human capital, China, hukou, income inequality, labour market segmentation, education, social assistance, migration
JEL:
H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions;
H75: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Government: Health; Education; Welfare; Public Pensions;
J42: Labor and Demographic Economics / Particular Labor Markets / Monopsony; Segmented Labor Markets;
I38: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Welfare, Well-Being, and Poverty: Government Policy; Provision and Effects of Welfare Programs;
R58: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Regional Development Planning and Policy;
E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity;
I28: Health, Education, and Welfare / Education and Research Institutions / Education: Government Policy;
D63: Microeconomics / Welfare Economics / Equity, Justice, Inequality, and Other Normative Criteria and Measurement;
O53: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Asia including Middle East;
J61: Labor and Demographic Economics / Mobility, Unemployment, Vacancies, and Immigrant Workers / Geographic Labor Mobility; Immigrant Workers;
E64: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Incomes Policy; Price Policy;
H53: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Welfare Programs;
D31: Microeconomics / Distribution / Personal Income, Wealth, and Their Distributions;
P25: Economic Systems / Socialist Systems and Transitional Economies / Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics;
O15: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Human Resources; Human Development; Income Distribution; Migration;
H52: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Education;
P36: Economic Systems / Socialist Institutions and Their Transitions / Socialist Institutions and Their Transitions: Consumer Economics; Health; Education and Training: Welfare, Income, Wealth, and Poverty;
I32: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Measurement and Analysis of Poverty;
H54: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
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