Short-term trends in China’s income inequality and poverty: evidence from a longitudinal household survey

In the past three decades, income inequality in China has increased rapidly relative to both China’s own past and other countries at similar levels of economic development. Using recent longitudinal data from the China Family Panel Studies (CFPS), this article examines changes in income inequality and poverty prevalence between 2010 and 2012. Surprisingly, we find a modest decline in income inequality as measured by the Gini coefficients in the CFPS data. The urban–rural gap narrowed, with rural families enjoying faster income growth than urban families enjoyed. Income growth was greater for middle-income families than for families with either high or low incomes in 2010. By all measures, poverty was greatly reduced between 2010 and 2012. Two-thirds of families that had been poor in 2010 escaped poverty by 2012.     

Poverty Dynamics in Turkey

This paper examines poverty dynamics in Turkey using a nationally representative panel data covering the 2005–08 period. The aim is to understand mobility in and out of poverty and its correlates. We find that almost a quarter of the poor are persistently poor. The conditional and unconditional exit rates that we estimate are within the range of values reported for developed countries in the literature. That the income events—but not transfers—dominate both poverty entries and exits is indicative of the major role labor markets play in the lives of the poor. In particular, we argue that given the characteristics of the poor and modest levels of social assistance, the reason for mobility rates close to European averages must be sought in the informal economy.     

Income mobility of individuals in China and the United States

Although much has been written about annual income inequality in China, little research has been conducted on longer‐run measures of income inequality and on income mobility. This paper compares income mobility of urban individuals in China and the United States in the 1990s. The following questions are taken up: To what extent are measures of annual income inequality misleading indicators of long‐run income inequality? How much income mobility was there in China in the first half of the 1990s and how did this compare with mobility in other countries? Have real income increases been greater for the poor or the rich? How important is the variation in permanent incomes in China and how has this changed?     

COHABITATION AND THE MEASUREMENT OF CHILD POVERTY

We use 1990 U.S. Census of Population data to calculate what poverty rates would have been if cohabitors were treated in the same manner as married couples. We find that the official treatment of cohabiting partners as separate family units overstated the extent of poverty in 1989 among all children by about three percent. Only about 11 percent of the observed rise in child poverty between 1969 and 1989 would be eliminated if the Census Bureau made this change in its definition of the family. We estimate a logistic regression model of the likelihood that poor, cohabiting families with children would be reclassified as non-poor if the cohabitor's income were included in family income.     

Financial development and poverty: evidence from the CFA Franc Zone

The financial liberalization in the 1980s and early 1990s led the CFA Franc Zone countries to deepen reforms in their financial systems. These reforms fostered financial development, which in turn may have reduced income poverty, as emphasized by several theoretical arguments in the literature. This study aims at estimating the contribution of financial development to poverty alleviation in the CFA Franc Zone. Results based on a panel of CFA Franc Zone countries show that financial development is associated with a drop in the proportion of poor population. Next, financial development reduces the extent to which the income of individuals falls below the poverty line. Moreover, in some cases, the effect of financial development on poverty may be subject to nonlinearities. Finally, financial instability or unstable financial development leading to crises may mitigate the favourable effect of financial development on poverty reduction. These findings are robust to the use of alternative measures of financial development and hold after controlling for a potential simultaneity and a small sample biases.     

Africa is on time

We present evidence that the recent African growth renaissance has reached Africa’s poor. Using survey data on African income distributions and national accounts GDP, we estimate income distributions, poverty rates, and inequality indices for African countries for the period 1990–2011. We show that: (1) African poverty is falling rapidly; (2) the African countries for which good inequality data exists are set to reach the Millennium Development Goal (MDG) poverty target on time. The entire continent except for the Democratic Republic of Congo (DRC) will reach the MDG in 2014, one year in advance, and adding the DRC will delay the MDG until 2018; (3) the growth spurt that began in 1995, if anything, decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.     

经济增长、收入分配与贫困——对新疆农村居民贫困变动的实证分析

通过运用FGT贫困指数和在Lorenz曲线基础上的贫困指示增长曲线对新疆农村最近几年的贫困变动进行研究。研究结果表明,从2003年到2007年,经济增长减缓了新疆农村的贫困状况,但收入分配状况的恶化在一定程度上抵消了经济增长减缓贫困的积极作用。除2003～2004年以外,其余时期的经济增长都不是亲贫式的增长,新疆农村的贫困人口在经济增长中获得的利益少于非贫困人口。因此,为了有效地减少贫困,新疆不仅要注重通过经济增长减少贫困规模,同时也要重视缩小收入分配差距,并且把减少收入分配不均等的重点要放在提高最贫困人口的收入水平上。     

FGT Old‐Age Poverty Measures and the Mortality Paradox: Theory and Evidence

Income‐differentiated mortality, by reducing the share of poor persons in the population, leads to the “Mortality Paradox”: the worse the survival conditions of the poor are, the lower is the measured poverty. We show that FGT measures (Foster et al ., 1984 ) are, in general, not robust to variations in survival conditions. Then, following Kanbur and Mukherjee ( 2007 ), we propose to adjust FGT poverty measures by extending the income profiles of the prematurely dead, and we identify the condition under which so‐adjusted FGT measures are robust to mortality changes. Finally, we show, on the basis of data from 2007 on old‐age poverty in 11 European economies, that the effect of extending income profiles of the prematurely dead on poverty measurement varies with: (1) the fictitious income assigned to the prematurely dead; (2) the degree of poverty aversion; (3) the shape of the (unadjusted) income distribution; and (4) the strength of the income/mortality relationship.     

Sen measures of poverty in the United States: Cash versus comprehensive incomes in the 1990s

Recently developed statistical inference procedures for the Sen index and its components – the headcount, income gap and Gini index among the poor – are used to test explicit hypotheses concerning aggregate poverty in the United States for the period 1989 to 1997. Changes in Sen measures of poverty are investigated for cash and comprehensive income using the official poverty line and six additional poverty lines drawn using thresholds set at 50, 75, 125, 150, 175 and 200 percent of the official level. The paper also reports on the effects of using comprehensive income on subgroup poverty rates and on the demographic composition of the poor.     

MEASURING SUB‐NATIONAL INCOME POVERTY BY USING A SMALL AREA MULTIVARIATE APPROACH

The present paper proposes a statistical strategy for the analysis of regional disparities in income poverty. For the EU countries, information on individual income has been collected until now by the European Community Household Panel survey, which only yields reliable estimates for very large regions within countries. In order to obtain reliable estimates for some of the poverty indicators suggested by the Laeken Council at the sub‐national level, we suggest the adoption of a multivariate small area estimation approach which enables us to reduce estimate variability. We concentrate on Italy, the country with the lowest degree of regional cohesion within the EU. Results show that disparity cannot be reduced to the so‐called “North–South divide,” with the “poor” South separated from the “affluent” North, as both these macro‐regions display large internal differences in terms of both poverty level and income inequality. The strategy we propose could also be adopted in order to measure poverty in other European regions, using information produced by the new EU Survey on Income and Living Conditions, which is replacing the European Community Household Panel.     

The Sins of the Fathers: Intergenerational Income Mobility in China

This paper aims to obtain an accurate estimate of China's intergenerational income mobility and to present evidence on its distributional pattern. Using panel data from the China Health and Nutrition Survey (CHNS) over the period 1989–2009, I find that China is less mobile than most developed countries. Then, I employ five different approaches to investigate the distributional pattern of China's intergenerational mobility across income levels. The results suggest that poor families have relatively high mobility, indicating opportunities for the poor children to escape poverty. Finally, I show that while wealthy fathers are likely to pass on their favorable economic status to their sons, rich sons come from a very wide range of family economic backgrounds.     

A SYNTHESIS OF POVERTY LINE DEFINITIONS*

A fundamental point of discussion in poverty research is whether poverty is an absolute or a relative concept. If poverty is seen to be a situation of absolute deprivation, a poverty line will usually be defined to be independent of the general style of living in society. If poverty is considered to be a situation of relative deprivation, a poverty line will be defined in relation to the general style of living in society. The choice for one of these two approaches has important consequences for social policy, as absolute poverty may be reduced by economic growth, while relative poverty will only decrease when income inequality decreases. This paper suggests a poverty line definition that is not a priori meant to be either absolute or relative, but depends on the perception of poverty in society. If the poverty line is higher in countries with higher median income (as an indicator of “general style of living”) the poverty line is said to be relative; if the poverty line does not vary with median income, it is said to be absolute. The poverty line definition suggested appears to be a generalization of almost all well-known poverty line definitions. Poverty lines thus defined are estimated for eight European countries on the basis of a 1979 survey. The resulting lines appear to have an elasticity with respect to median income of 0.51, and hence can be said to be halfway on the scale between absolute and relative.     

FOOD NEEDS AND ABSOLUTE POVERTY IN URBAN SOUTH AMERICA

The minimum cost of an adequate diet, following food preferences, is estimated for families in ten South American cities in five countries, allowing for household composition by age and sex. The ratio of actual expenditure on food and beverages to this normative expenditure is then used to rank families in six classes, of which the bottom two correspond to absolute poverty, or to actual expenditure less than the estimated minimum. Three questions can then be explored: which families appear to be poor, on this measure? how do such families allocate their spending toward other items such as housing? and, does this indicator of poverty classify families in much the same way as other proposed measures? The results suggest some under-reporting of food spending in the poorest class, but otherwise the ratio of reported to normative spending gives good results, free from the errors in other parts of the budget and the arbitrariness of indicators which depend on socially-defined rather than physiological “needs.” Poor families tend to be large, with many children; to have many dependents per income recipient; to have male working members other than the head; to suffer unemployment of members other than the head; to have relatively low levels of schooling; and to show high density in housing. Even quite poor households spend appreciable amounts on housing and on education, while not satisfying all food needs; both kinds of spending increase rapidly as food requirements are met. There are no consistent relations between poverty and type of employment or the share of income attributed to the head. The data refer to 1966–69 and are highly comparable; all monetary estimates are in dollars of equal purchasing power.     

Poverty risk of the unemployed in six European countries: why is it higher in some countries than in others?

In all European countries unemployed persons face a high risk of relative poverty, but poverty rates vary greatly among EU countries. We analyse to what extent these differences could be explained by a different composition of the unemployed or by differences in the national income distribution functions. Our results indicate that the effects of individual characteristics on the poverty risk are roughly comparable between countries, but the composition of the unemployed is very different, which explains on average half of the cross-country differences in poverty rates.     

IS POVERTY INCREASING IN THE DEVELOPING WORLD?

We assess the developing world's progress in reducing poverty during the late 1980s using new data on the distribution of household consumption or income per person for 44 countries. Local currencies are adjusted to purchasing power parity. To assess robustness, restricted dominance tests are applied to the poverty comparisons. An overall decrease in poverty incidence is indicated over a wide range of poverty lines and measures. However the change is small, and numbers of poor increased at roughly the rate of population growth. The experience was diverse across regions and countries; poverty fell in South and East Asia, while it rose in Latin America and Sub-Saharan Africa.     

Natural Resources and Missing Inputs in International Productivity Comparisons*

Standard theory for cross-country productivity comparisons assumes all countries use the same factor inputs in production. This assumption is violated when including natural resources, such as oil, gas and gold, because countries do not extract the full set of resources. In this paper we propose a solution by viewing it as a “missing goods” problem and assigning missing inputs a reservation price equal to the world resource price. We show that this has a substantial impact on relative productivity levels for countries heavily reliant on natural resources for generating their income. Under our new productivity measure, resource-rich countries are no longer uncommonly productive.     

“When Life Gives You Lemons”: Using Cross-Sectional Surveys to Identify Chronic Poverty in the Absence of Panel Data

At the core of poverty eradication is the need to eliminate that poverty that is persistent over time (chronic poverty). Unfortunately, traditional approaches to identifying chronic poverty require longitudinal data that is rarely available. In its absence, this paper proposes an alternative approach that only requires 1 year of cross-sectional data on monetary and non-monetary poverty. It puts forth two conjectures and contends that the combined profile of a household as both income poor and multidimensionally poor can be used as a proxy of that household being chronically income poor. To explore the viability of this approach, we use a probit model and longitudinal data for three Latin American countries to estimate households’ probabilities of remaining in income poverty based on their past income and multidimensional poverty statuses. We find empirical support for the approach that is significant, consistent across countries, and robust to various controls and periods of analysis.     

USING PSEUDO‐PANELS TO MEASURE INCOME MOBILITY IN LATIN AMERICA

This paper presents a comparative overview of mobility patterns in 14 Latin American countries between 1992 and 2003. Using three alternative econometric techniques on constructed pseudo‐panels, the paper provides a set of estimators for the traditional notion of income mobility as well as for mobility around extreme and moderate poverty lines. The estimates suggest very high levels of time‐dependent unconditional immobility for the Region. However, the introduction of socioeconomic and personal factors reduces the estimate of income immobility by around 30 percent. There are also large variations in country‐specific income mobility (estimated to explain some additional 10 percent of inter‐temporal income variation). Analyzing the determinants of changes in poverty incidence within cohorts revealed statistically significant roles for age, gender, and education of the household head, the latter subject to distinctive effects across levels of attainment and transition in and out of poverty.     

The structure of income mobility: empirical evidence from five UE countries

In this paper we use the European Community Household Panel (ECHP) to assess differences in the level and structure of income mobility in a selected sample of European countries. We adopt recent theoretical proposals for the decomposition of axiomatic and welfare measurements of mobility in exchange, structural and growth components. Decomposition exercises which take into account some type of division of the population and income sources are also performed. We find that cross-country income mobility comparisons largely depend on the type of indices used. The relative positions of the countries considered change when the analysis is based on ethical instead of objective measures of income mobility. Results also show that in most countries income growth has a very limited effect upon aggregate mobility, being the most important determinant the rerankings of individuals, with a little weight for inequality changes. Although some common results exist concerning the delimitation of groups experiencing the greatest income fluctuations, such as individuals belonging to single-parent households or young household heads, the intensity of these results varies greatly across countries. The authors would like to acknowledge financial support from the Ministry of Science and Technology (grant SEJ2004-07373-c03-03) and the Instituto de Estudios Fiscales. We would also like to acknowledge the help given by the European Centre for Analysis in Social Sciences of the University of Essex.     

Individual needs and social pressure: Evidence on the Easterlin hypothesis using repeated cross-section surveys of Canadian households

This paper provides additional evidence, using time-series and cross-sectional Canadian survey data, for the Easterlin hypothesis of an important income elasticity of individual needs. Our analysis is based on the regression of a minimum income to satisfy needs equation derived from a simple utility maximization framework. Moreover, our specification allows computing the Arrow-Pratt relative risk-aversion index and the Intertemporal Rate of Substitution. Our results are robust to different estimation methods dealing with the endogenous nature of income. We also compute poverty rates using our estimated equation parameters and standard OECD measures of poverty and find that some subjective measures are relatively close to the OECD measures.