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Income polarization in China: Trends and changes
Institution:1. School of Urban & Regional Science, Shanghai University of Finance & Economics, 777 Guoding Road, Shanghai 200433, China;2. Asian Development Bank Institute, Kasumigaseki Building 8F, 3-2-5, Chiyoda-ku, Tokyo 100-6008, Japan;3. Yunnan University of Finance & Economics, 237 Longquan Road, Kunming 650221, Yunnan, China;1. Macquarie Business School Macquarie University, NSW 2109, Australia;2. Institute of Financial Studies Southwestern University of Finance and Economics, Chengdu, China;1. University of Bamberg and Institute for Employment Research (IAB), Germany;2. Düsseldorf Institute for Competition Economics (DICE), Germany;1. School of Economics, Central University of Finance and Economics, China;2. Michigan State University, USA;1. LEMMA, Université Paris 2 Panthéon-Assas, France;2. THEMA, CY Cergy Paris Université 33, boulevard du port 95000 Cergy France;1. Department of Economics, Hannam University, 70 Hannamro, Daedeokhu,Daejeon 306-791 Republic of Korea;2. Department of Chinese Studies and Economics, Hannam University,70 HannamroDaedeokhu,Daejeon 306-791 Republic of Korea
Abstract:This paper estimates income polarization in China from 1978 to 2010 and decomposes the estimated polarization by population subgroups. In addition, a framework is proposed to disentangle a change in polarization into a growth and a redistribution component. This framework is then used to quantify the contributions of various income sources to a rise in polarization in China between 2002 and 2007. The analytical results suggest that (1) income polarization exhibited a broadly increasing trend from 1978 to 2010; (2) income polarization was large and rising among rural citizens, while low and declining among urban citizens; polarization of migrants also declined; (3) geographically, income polarization rose in east and particularly central China, while west China was most polarized with little change over time; and (4) the rise in polarization between 2002 and 2007 was mainly driven by the investment income, followed by transfers. Conversely, business income is polarization-reducing, especially in rural China. To a lesser extent, wage is also polarization-reducing, especially among migrants.
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