-~~'<~~~- 7+ - -; 7 > _- -r~~~~~~J7 -'~~~~~~~~~ _ .f;*>¢r,e ...- _ " d %', i ' 't i'' ' 4 ' *' .s- A-:- -- M 4 . 'swf; v $ z & -1 -g%4---~ ~~~~a q to¢v->u> tbbl^ J,lwm0 8-4. .- . Ot- J ;gat. 1 ZhL, _ t t, C H INA 2 02 0 SHARING RISING INCOMES China 2020: Development Challenges in the New Century Clear Water, Blue Skies: China's Environment in the New Century At China's Table: Food Security Options Financing Health Care: Issues and Options for China Sharing Rising Incomes: Disparities in China Old Age Security: Pension Reform in China China Engaged: Integration with the Global Economy 0 T H E W O R L D B A N K W A S H I N G T O N D . C -~ MM -~ -Cl -- - SHARING RxISING INCOMES D I S P A R I T I E S I N C H I N A C T H E W O R L D B A N K W A S H I N G T 0 N D . C Copyright © 1997 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing September 1997 The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemina- tion of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive, Danvers, Massachusetts 01923, U.S.A. Cover photograph by Claus Meyer/Black Star. Cover insets (from left to right) by Vince Streano/Aristock, Inc.; Dennis Cox/China Stock; Serge Attal/Gamma Liaison; Dennis Cox/China Stock; Joe Carini/Pacific Stock; Erica LansnerlBlack Star. ISBN: 0-8213-4075-1 | p;~~~~~~~~~~~~~~~~~~~~~~~s Contents t~~-4; Acknowledgments vii Overview 1 Chapter 1 Richer but Less EquaL 7 Growing unequal: National trends 8 Growing out of poverty? 9 Chapter 2 Growing Apart: Rural-Urban and Coastal-Interior Gaps 15 The rural-urban divide is growing 15 The magnitude of rural and urban inequalities depends on how incomes are measured 17 The gulf between the coast and the interior is widening 20 Chapter 3 Understanding Inequality 27 The structure of employment is changing 28 The value of education is increasing 32 Land remains a powerful source of social protection 34 Women are increasingly at risk 38 Chapter 4 How Policies Affect Individual Welfare 43 Eliminating policies that favor the better-off 44 Protecting the absolute poor 45 i11 g f: ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~v s~~~~~ I - Boosting the potential of the near poor 47 Caring for the urban poor 49 Annex 1 Migration and Inequality in China 53 Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 61 References 77 This report uses Hong Kong when referring to the Hong Kong Special Administrative Region, People's Republic of China. vi Sharing Rising Incomes: Disparities in China * Acknowledgments his report was written by Tamar Manuelyan Atinc based on inputs from many individuals. Discussions with Chinese officials during a July 1996 mission were particularly helpful in identifying the main challenges facing the authorities and under- standing the institutional context in which policies affect- ing income distribution evolve. The mission, comprising Tamar Manuelyan Atinc, Valerie Charles, Albert Keidel, a- - XXand Julia Li, is particularly thankful for the assistance of the State Planning Commission's Spatial and Regional Planning Department. The contributions of Chen Xuan Qing, Chen Xiang, and Yan Pangui are gratefully acknowledged. X-- l The study also could not have been carried out without the help of the State Statistical Bureau. Information pro- vided by the urban and rural household survey team and background papers prepared by the bureau's Research Institute were essential ingredients for the report. vii 3S | | I The report also benefited from analytical inputs, some (Columbia University), and Lyn Squire (World Bank). in the form of background papers, from many scholars Other World Bank staff were also generous with their who have shown keen interest in income inequality. time and advice, including Vinod Ahuja, Liang Li, Within the World Bank these included Shaohua Chen, Natalie Lichtenstein, Andrew Mason, Richard Yuri Dikhanov, Francisco Ferreira, Marcel Fratzscher, Newfarmer, Vikram Nehru, and Alan Piazza. Bonita Shaikh Hossain, Aart Kraay, Martin Ravallion, Christine Brindley provided valuable advice on writing. Klaus Wong, Colin Xu, Xiaoqing Yu, Tao Zhang, and Heng-Fu Rohland and Nicholas Hope provided strategic guid- Zou. Outside the Bank, Robin Burgess (London School ance and able management. of Economics/STICERD) and Calla Wiemer (University The report was edited by Meta de Coquereaumont of Hawaii) made valuable contributions. and Paul Holtz, laid out by Damon lacovelli and Laurel Valuable comments were also received from peer Morais, and designed by Kim Bieler, all with the reviewers, including Stephen Howes (World Bank), American Writing Division of Communications Nora Lustig (Brookings Institution), Carl Riskin Development Incorporated. viii Sharing Rising Incomes: Disparities in China | S G 9 Y ~per capita has unequal or has become more so. And 1 fl ~~~~~a remarkable 8.2 gender disparities in the marketplace i_ i ~~~~~econormc reforms may be more pronounced. E * arkt incentives hlave Elsewhere, high inequality has 1 X increa~~icresed factor dlepressed growth, undermined poverty 5_ | w ed ~~~~retums to land alleviation, and contributed to social ; 31 I 9-va~~~all, a staggenng teiision. China's income inequality, sim- vha~~~~~~~ve been lifted out ilar to that in the United States, remains :l ~~~~~~~~~~moderate by international standards. za W pge ~~~With schooling, as the country's transition unfolds, a ! k a~~~~~d have beenl able increased inequality need not u-nder- i1 N | ; 5 r3t the new market mine growth or social harmony-pro- 1 1|3 g ~~~to spur growth. vided It is accompanied by broadly 11 rvt>4~~~Oi-cies, or their based growth, equal access to opportu- t11 | pbening ~~inequalities. nities, and protection for the poor and | V 0 E ~~urban areas. vulnerable. The challenge for the &vo-r the coast. Chinese government iS tO extend the a 111 lo n f ~~~health care, benefits of growth to all members of a I Uu3ltiesremal~~iesreais sciety. i1 Af ' I X S ~~~~~~ | F ~Overview hina's income distribution has become increas- ingly unequal since reforms started in 1978. The Gini coefficient (a common measure of income inequality), a low 28.8 in 1981, reached 38.8 in 1995. A change of this magnitude is highly unusual and signals deep structural transformation in the distribution of assets and their returns. Inequality has risen in large part because China has begun to harness the enormous potential of its people, suppressed during the first three decades of Communist rule. At the height of egalitarianism individual remunera- tion barely reflected productivity. In 1978 the government introduced individual incentives and market forces that immediately began to increase returns to capital and land, diversify employment, and increase factor mobility. Not surprisingly, the benefits of growth were distributed unevenly, accruing to those most able to take advantage of 4>-- | f'rising opportunities-the educated and the enterprising, the mobile, and those with high-quality land. To some similar to that of the United States and close to the East degree inequality was necessary for the rapid growth Asian average-substantially higher than in Eastern that followed the adoption of reforms. But government Europe but much lower than in Sub-Saharan Africa and policies, or their absence, are exacerbating inequalities. Latin America (table 1). Social policies favor urban over rural areas, economic Moreover, China's spectacular growth has been policies favor the coast over the interior, and access to accompanied by substantial gains in poverty reduction. education, health care, and labor mobility remains Since the start of reforms in 1978, China has lifted some unequal or has become more so. And the price of admis- 200 million people out of absolute poverty. But sion to a more affluent society appears to be higher for progress has been uneven. Most of the poverty reduc- women than for men. tion occurred in the early part of reforms, when the Should China's policymakers be concerned about the household responsibility system was introduced in rural increasing polarization of incomes? Elsewhere, high areas. But in the mid-1980s and early 1990s poverty inequality has impeded growth, undermined poverty levels stagnated despite steady gains in per capita GDP. alleviation, and contributed to social tension. China's Since 1992 renewed momentum has decreased the income inequality is still moderate. The benefits of number of poor, and by the end of 1995 less than 6 per- growth have been unevenly distributed, but they have cent of the population had incomes below the absolute reached the poor. Moreover, much of the increase in poverty line. inequality reflects a welcome adjustment to an incentive Growth in rural incomes has transformed poverty sta- and remuneration structure more typical of market tistics. Per capita GDP growth did not always increase economies. But if not moderated, some aspects of personal incomes, but when it boosted rural incomes, China's inequality may imperil future growth and poverty declined. Without rural income growth, the stability. number of absolute poor in China would have increased Social tension can result when the benefits of growth by more than 100 million between 1981 and 1995 accrue unequally to easily identifiable groups-for because of adverse distributional changes. Instead, the example, geographic and urban-rural imbalances, ranks of the poor fell by more than 150 million. inequalities between ethnic groups, and gender dispari- But there is no room for complacency. Reforms have ties-even if these are not major factors in explaining not reduced the large welfare differences between rural overall income inequality. If richer groups enjoy consis- and urban households; on the contrary, these have tently higher growth, simmering social tensions can increased. Policies favoring the coast have reinforced become politically destabilizing and ultimately derail the region's natural endowments, widening the gulf growth and poverty reduction. Social and economic between coastal and interior provinces. Market forces progress can also be damaged by rising inequalities in have raised productivity, but labor markets remain seg- opportunities. Experience elsewhere suggests that mented. And if the marketplace alone is left to dictate inequalities in access to basic health and education typ- ically accompany higher income inequality and can intensify its negative effects on society. Policymakers in TABLE 1 intensify iseaveftoChina's inequality puts it in the middle of the China need to manage the widening gap between rural pack internationally and urban areas, the growing disparities between the (Gini coefficient) coast and the interior, and the increasing inequality Region or country Region or country1980s l990s across income groups in access to opportunities for self- rr ~~~~~Eastern Europe 25.0 28.9 improvement. Chinaa 28.8 38.8 High-income countries 33.2 33.8 and problems ~~~~~~~~~South Asia 35.0 31.8 Progress and problems East Asia and the Pacific 38.7 38.1 Middle East and North Africa 40.5 38.0 Although China's income inequality has risen rapidly, it Sub-Saharan Africa 43.5 47.0 Latin America and the Caribbean 49.8 49.3 has not yet pushed the country into the ranks of the a. Data are for 1981 and 1995. notoriously unequal. China's Gini coefficient is now Source: Deininger and Squire 1996; Ahuja and others 1997. 2 Sharing Rising Incomes: Disparities in China increasing accommodation of the swelling demand for rural emigration, important impediments remain, reflect- China's increasing inequality is driven by the rural-urban gap and provincial disparities ing the government's desire to control the pace of migra- Theil index tion and to ensure grain self-sufficiency. The absence of a housing market and limited access to social services in urban areas pose additional constraints to labor mobility. 0.25 Contribution to change in inequality between 1985 and 1995 RuraL-urban Regional disparities are widening 0.20 inequality /47.4% InterprovincL As China opened to the outside world, the coastal 0.15 _/Interprovinial ... . 7% / inequality provinces were poised to seize opportunities presented 0.10 IntraruraL by their proximity to world markets, access to better inequality infrastructure, and educated labor force. But they were 0.05 Xntraurbanalso helped by the central government's preferential ine. Q meualit policies, which stimulated foreign investment. As a 0 1985 1995 result interprovincial inequality has risen. It accounted Note: Inequality (the Theil index or mean Log deviation) is decomposed first for almost a quarter of total inequality in 1995 and into urban and rural and then into its regional components. explained a third of the increase since 1985 (see figure Source: World Bank staff estimates based on State StatisticaL Bureau data. (se e 1). In 1985 residents of interior China earned 75 per- cent as much as their coastal counterparts; by 1995 this social conditions, the quality of China's human had dropped to 50 percent. resources may become more and more uneven, creating and isolating winners and losers based on education, Access to opportunities is becoming less equal assets, and, increasingly, gender. People's different endowments suggest that inequality The rural-urban divide is increasing in outcomes is not only unavoidable but also that it can help nourish creativity and spur growth. As a China's urban dwellers enjoy a considerably higher stan- result most societies tolerate some inequality in dard of living than their rural counterparts. Rural income. How much depends on the historical and cul- incomes grew rapidly in the early period of reforms but in tural factors shaping each society's preferences. Much 1985 began to trail the increases in urban incomes, a trend of the increase in China's income inequality needs to reversed only in 1995. According to official data, the be evaluated in the context of the country's systemic rural-urban income gap explained one-third of total transition. Transition has brought an adjustment in inequality in 1995 and one-half of the increase in inequal- relative prices, revaluing endowments and characteris- ity since 1985 (figure 1). Internationally, the urban-rural tics that are conducive to productivity gains. Such income ratio rarely exceeds 2.0-as it does in China-and adjustments are acceptable. in most countries it is below 1.5. But even China's high More insidious is inequality in access to opportuni- ratio fails to capture the full extent of disparities in living ties to improve incomes and welfare, which also has standards between city dwellers and rural residents. An been found to hamper growth prospects. China's highly elaborate set of publicly provided services-housing, pen- egalitarian land distribution has helped protect the sions, health, education, and other entitlements-aug- nutritional status of the poor. But educational attain- ment urban incomes by an average of 80 percent. And ment and access to health care are becoming less equal when official data are adjusted, rural-urban disparities as market orientation encourages cost recovery in pub- accounted for more than half of total inequality in 1995 lic institutions. There is also evidence that families and explain even more of the increase since 1985. invest less in girls' than boys' education and health. China's large rural-urban gap points to imperfect Coupled with rising discrimination against women in mobility in factor markets, especially for labor. Despite the labor market, this tendency threatens to erode Overview 3 women's hard-earned gains, which have been a source incomes from grain, a heavily regulated subsector. of national pride. Finally, imperfect labor mobility cre- Reforms in grain policies are needed to improve this ates unequal access to better-paying jobs. China's seg- group's standard of living. Greater integration in labor mented labor markets are reflected in the near-absence markets and better-functioning credit markets would also of urban poverty, the relatively low level of urbaniza- help. The government's decision to align grain procure- tion, and the large rural-urban income gap. ment prices to market prices is welcome. Better transport infrastructure and changes in the grain distribution sys- Policies to grow with tem would help boost farmgate prices, and more spend- ing on agricultural research and extension could increase Income inequality may well continue to rise as China's yields. Above all, the near poor would benefit from shift- transition unfolds. But increasing inequality need not ing out of low-return grain production into higher-value undermine growth or social harmony-so long as crops or off-farm employment. But such shifts would growth is broadly based, policy biases are eliminated, require government willingness to import more food. and the poor and vulnerable are protected. Urban poverty. Although urban poverty is negligible, it Protecting the poor and the vulnerable may become an increasing concern as enterprise reforms deepen and China continues to urbanize. Unemployment Investment in human capital is key to long-term improve- (including furloughs) in China's cities has already reached ments in welfare for all, but other policies can usefully dif- 8 percent of the labor force. The government needs bet- ferentiate treatment by segments of the population. ter information about the urban poor to develop assis- tance programs for them. Establishing a meaningful The absolute poor. In 1995 there were 70 million urban poverty line would help, as would systematic mon- absolute poor in China. If current assistance programs itoring of the unemployed. Now is also an opportune time were targeted more accurately, they would alleviate for the government to examine its social protection sys- more poverty and cost less. In 1990 almost half of tem; substantial work has already gone into analyzing the China's poor lived outside the counties designated for pension and health care finance systems. Additional special assistance programs. These programs would be efforts should concentrate on other benefits such as unem- more effective if they were targeted at the level of town- ployment compensation, disability, and labor training ships, or perhaps even administrative villages and retraining schemes. Finally, a better job information The government should also consider refocusing pri- system would facilitate the redeployment of labor, while a orities in its poverty reduction strategy. A renewed systematic evaluation of urban job creation programs emphasis on basic education and health services for the would help disseminate the lessons of their success or poor is essential, combined with assistance for finding failure. employment in economically advanced areas. There is a need to ensure essential health services for the poor and Eliminating policy biases and strengthening to strengthen public health programs. Poor households reguLations must be compensated (through scholarships) for the costs of educating their children, and in this the govern- Public policies in China tend to exacerbate the gap ment is aided by the demographic transition-the num- between rich and poor. Policy changes in four areas ber of school-age children is declining. Govemment would benefit welfare and income distribution. assistance to the poor in finding jobs outside their imme- diate home area should be expanded because remit- Redressing the urban bias. Housing, food, migration, tances contribute significantly to reducing rural poverty. credit, state employment, and other policies provide de facto subsidies for urban residents. Some of these poli- The near poor. About 100 million additional people cies directly lower the welfare of rural residents. Others survive on less than $1 of income a day (in 1985 pur- do so indirectly, by preempting public resources that chasing power parity dollars) and derive almost half their could be targeted at more needy populations. 4 Sharing Rising Incomes: Disparities in China Removing the coastal bias in economic policies. The can make the retirement age for men and women the natural and human capital advantages of the coastal same and avoid discrimination in benefits provision. provinces are sufficient to attract foreign investment and Regulations and firm-level subsidies can spread the costs need not be bolstered with preferential policies. In addi- of child rearing, which usually are shouldered solely by tion, a reformed intergovernmental transfer scheme women. would reduce disparities in public spending across provinces; the government should accelerate its design Dealing fairly with the rich. Some of China's newly and implementation. Policies that favor the interior also rich have worked hard and taken calculated risks to may help address the widening gulf between China's benefit from new market opportunities. But others are interior and the coast, but additional research is needed taking advantage of China's incomplete transition to on an appropriate package of regional growth policies. accumulate ill-begotten wealth. The government is International experience with regional development right to focus on the second group. To combat corrup- efforts has generally been negative, but there has been tion and to counter rent-seeking behavior, the govern- little systematic analysis of this important issue. ment must enforce its regulations. Doing so will require reducing bureaucratic discretion, establishing Countering gender bias in household allocation deci- clear and transparent rules for public decisionmaking sions and in the marketplace. Education grants can pro- (such as public procurement), and stamping out access vide incentives for families to educate girls. Government to insider information in financial markets. Overview 5 Richer but Less Equal >;00 China's reforms have continued, its income 1 C-S distribution has become more unequal. In 1981 China was an egalitarian society, with an income distribution similar to that of Finland, the Netherlands, Poland, and Romania. But rapid economic growth has brought dramatic change, so that China's income inequality is now just about average by international standards (figure 1.1). In 1981 China's Gini coefficient (a measure of inequality of income distribution ranging from 0, absolute equality, to 100, absolute inequality) was 28.8. By 1995 it was 38.8-lower than in most Latin American, African, and East Asian countries and similar to that in the United States, but higher than in most transition economies in Eastern Europe and many high-income countries in Western Europe. The increase in China's Gini coefficient was by far the largest of all countries for which comparable data are available (figure 1.2). Such a large change is unusual. Levels of inequality vary enormously by country, but 7 income distributions are strikingly stable over time Still, China's recent experience stands out even in this within a given country (Deininger and Squire 1996). crowd. Not even the transition economies of Eastern When large changes do occur, they generally signal deep Europe and the former Soviet Union registered structural transformations in the underlying distribu- increases in inequality as large as those observed in tion of assets and in their rates of return. Recent exam- China over the past fifteen years. Moreover, some East ples come mainly from transition economies, but Brazil, Asian countries actually saw inequality fall during this Thailand, and the United Kingdom have also experi- period. enced substantial increases in inequality. Growing unequal: National trends _~~ 5< Since 1981 China's income distribution has Regardless of how inequality is measured, China's become much less equal ... income distribution has become more unequal (figure Gini coefficient 1.3). This conclusion holds despite the many shortcom- 70 ings of China's household survey data (box 1.1). The decile ratio (the ratio of the mean income of the top 10 60 percent of the population to the mean income of the 50 bottom 10 percent) has been rising, especially since China * 1990, suggesting increasing divergence between the 40 A 995 richest and poorest groups. i * i Since the start of reforms China has experienced three 30 * 0 * Eli gg S distinct periods im the evolution of personal incomes (box 20 China 1.2).1 Between 1981 and 1984 all segments of society ben- 1981 efited from across-the-board improvements in welfare, o0 with only a small rise in inequality. Between 1984 and 0 DP5,000apit 10,000asing 15,00 20,000 25,000s1989 personal imcomes stagnated and became increas- ingly unequal, implying real losses in the standard of liv- Note: See figure notes at end of chapter. Source: Deininger and Squire 1996; World Bank 1996f, World Bank staff estimates. Other measures of inequality point to the same conclusion as the Gini index, 1981-95 ... because of remarkable changes between Index Ratio 1981 and 19950451 Change in Gini coefficient (percentage points) 0.40 13 China, 1981-95 0.35 Gini index 11 ThaiLand, 1981-92(lfaxs United Kingdom, 1981-91 0.30 *o" Hungary, 1982-93 0.25 Decile ratio 9 Russia, 1980-93 r7 Brazil, 1981-90 0.20 , Germany, 1981-92 5 United States, 1981-91 0.15 Theil indexes AustraLia, 1981-90 0.10 (teft axis) 3 India, 1983-92 Mauritius, 1986-93 0.05 1 Jordan, 1980-91 0 -1 MaLaysia, 1979-89 1981 1983 1985 1987 1989 1991 1993 1995 Indonesia, 1980-93 Korea, Rep. of, 1980-88 Note: The deciLe ratio is the ratio of the mean income of the top decile of -6 -4 -2 0 2 4 6 8 10 the popuLation to the mean income of the bottom decile. The TheiL indexes (Theil 1 and 2, or mean Log deviation) beLong to the generalized entropy Note: See figure notes at end of chapter. cLass of inequality measures, which are decomposable. Source: Deininger and Squire 1996; World Bank 1996f; World Bank staff estimates. Source: State StatisticaL Bureau data and World Bank staff estimates. 8 Sharing Rising Incomes: Disparities in China BOX 1.1 Shortcomings of household survey data-and what this report does about them This report's analysis of China's income distribution is based on Guizhou, Guangdong, Yunnan) for 1985-90) and rural and urban the results of household surveys carried out by China's State data for Sichuan and Jiangsu provinces for 1990. As a result sys- Statistical Bureau. These surveys have many shortcomings, but tematic corrections could not be made to the shortcomings they remain the only source of comprehensive data over a long identified above. Instead, partial adjustments have been made enough period to assess national trends in the distribution of in various sections of the report to indicate the magnitude and income (see World Bank 1992 and Chen and Ravallion 1996 for a direction of the resulting effect on inequality. The aggregate detailed discussion of problems with rural surveys). The main effect of these and other necessary corrections cannot be deter- concerns with the surveys relate to coverage, definitions, and mined with any precision at this time. Further collaboration processing after data collection: with the Stdte StatisticaL Bureau is needed to confirm that the * The surveys are based on the registration system (hukou) and report's findings are robust and to adjust survey desigr and tab- so do not capture migrants into urban areas without a hukou. Fey. ulation methodology for the future. The report's analysis migrants acquire resident status, so this omission is serious and includes the following adjustments. growing. * The living standards of migrants are discussed only with ref- * Urban and rural surveys are based on incompatible definitions erence to special surveys on migrant populations and cannot be of incomes, which reduces comparability and hinders aggregation integrated with the overall income distribution. into a national distribution. * For the most part, national trends are based on an aggrega- * The data do not account for spatial differences in the cost of tion of rural and urban household surveys into a national distrib- living. Thus neither regional differences within the urban and ution without any adjustments in the definition of income or for rural surveys nor national rural-urban differences can be treated spatial price differentials. systematically. * Some indicative adjustments help provide a more accurate * Urban household surveys exclude in-kind income such as picture of the components of inequality: nean urban and rural housing, health care, and education benefits. Also, the surveys incomes are adjusted to include in-kind incomes using informa- appear to be geared toward recording labor income, and so miss tion from the State Statisticat Bureau and the four-province rurat many of the newly affluent. dataset; and a cost of living differential is introduced to account * Summary urban data in the China Statistical Yearbook for for higher prices in urban areas. 1989-95 suffer from aggregation problems that understate urban * The four-province dataset is used to correct for grain pricing, inequality. cost of living differentials, and the valuation of housing and con- * Until 1990 rural household surveys valued in-kind grain sumer durables. This allows for a more accurate valuation of rural income at official prices, understating rural income considerably. incomes, inequality, and changes over time. After 1990 and until recently own-grain consumption was valued * For 1989-95 the report uses urban data aggregated by the at the weighted average of official and market prices, but practice Beijing office of the State Statistical Bureau but coming from a varied by province. Both distorticns make it difficult to analyze subsample of the survey that has consistently higher mean trends over time and across provinces. incomes than the published data. * Definitions of residence and income have changed over time. * The effect of in-kind incomes on levels of and changes in Urban residency was extended to some periurban areas in 1985, urban inequality is investigated using information provided by and pensioners were included in income surveys starting only in the State Statistical Bureau for 1990 and 1995. 1985. * The analysis of the determinants of inequality rehles largeLy on This report did not have access to individual household data available microdata and thus is sensitive to measurement except for rural data from four Southern provinces (Guangxi, changes. ing for a large part of the population. Renewed growth in lion people out of absolute poverty. Most of this incomes between 1990 and 1995 appears to have reached progress occurred in the early years of reforms, when the poorer (but not the poorest) segments of society but the introduction of the household responsibility system was accompanied by substantial increases in inequality. transformed China's countryside. In the mid-1980s and early 1990s poverty levels stagnated (and increased in Growing out of poverty? some years) despite steady gains in per capita GDP. These trends generated concern about the quality of China's record on reducing poverty is enviable. Since Chinese growth because increases in inequality that reforms started in 1978, China has lifted some 200 mil- occur because the poor stay poor or get poorer while Richer but Less Equal 9 China's income distribution, 1981-95: A tate of three periods Growth with equity Between 1981 and 1984 Chinese from all walks China started its economic reforns iri 1978 with the introduction of of life benefited from reform the household responsibility system. The unleashing of rural pro- Share of population (percent) ductivity in response to the provision of incentives for personal gain 80 are by now well-known. Between 1981 and 1984 the national 70 1981 income distribution shifted to the right (see top figure), indicating 60 across-the-board benefits from reforms. Mean incomes increased by 1984 12.6 percent a year (in real terms) during this period. The slightly 50 flatter curve in 1984 indicates an increase in inequality relative to 40 1981, although the distribution of income remained remarkabLy 30 equaL for such a large shift in average incomes. Between 1981 and 20 1984 the Gini coefficient increased slightly, from 28.8 to 29.7 10 0 Inequality with little growth income (1990 Yuan tog scale) Between 1984 and 1989 the income distribution curve shifted dra- Source- World Bank staff estimates matically. Inequality became much more pronounced, with the Between 1984 and 1989 the rich got richer as shorter and wider 1989 curve reflecting a jump in the Gini coeffi- the poor got poorer cient from 29.7 in 1984 to 34.9 in 1989 (see middle figure). Share of population (percent) Interestingly, these large distributional shifts occurred despite stag- 80 nation in personal incomes. Between 1984 and 1989 average 1984 incomes increased by less than 1 percent a year. Although the mean income of the top decile of the population increased by 2.8 percent 60 a year (shift to the right in the right tail), the mean income of the 50 bottom decile dropped by 4.5 percent a year (shift to the left in the 40 left tail). Positive income growth started occuning only with the 30 sixth decile. These changes are reflected in a deterioration in 20 poverty indicators during this period, which atso saw an increase in 10 1989 rural-urban disparities (the bulge in the upper right side of the 1989 curve). 0 A1f9t3°W6?Zo,,,0,ob1>3 Income (1990 yuon, log scale) Source: Wortd Bank staff estimates Growth with inequality Between 1990 and 1995 renewed growth in personal incomes (7.1 Between 1990 and 1995 most people got richer percent a year) was associated with substantialincreases in inequal- ity (see bottom figure). During this period the Gini coefficient Share of population (percent) increased from 33.9 to 38.8. Still, the benefits of growth reached 80 people at the lower end of the income distribution, with the possi- 70 ble exception of those at the very bottom (incomes less than 190 60 1990 yuan a year in 1990 prices). Incomes of the bottom decile (less than 50 337 yuan a year) increased by 1.7 percent a year between 1990 and 4 1995 1995, but most of these gains were registered in 1994 and 1995, when the mean income of this group grew by 6.7 percent a year. 30 Mean incomes of the top decile increased by 9.7 percent a year 20 between 1990 and 1995 but by as much as 12.1 percent between 10 1990 and 1994. Growth in 1995 appears to have considerably equal- o ized the distribution of incomes. 3 3,9 3 Income (1990 yuan, log scale) Source: State Statistical Bureau data and World Bank staff estimates. Source. World Bank staff estimates. 10 Sharing Rising Incomes: Disparities in China the rich get richer are particularly damaging. Since implying that the number of poor declined by 0.5 per- 1992, however, poverty has declined markedly, and at cent for each percentage point of growth in GDP per the end of 1995 less than 6 percent of the population capita. But this outcome masks substantial differences had incomes below the absolute poverty line. in the effect GDP growth had on poverty during differ- Overall, GDP growth helped reduce poverty during ent periods. During 1981-84 and 1993-95 per capita this period (figures 1.4 and 1.5). Between 1981 and GDP growth was high (about 10 percent a year) and 1995 the poverty elasticity of growth was close to -0.5, poverty elasticities were -3.6 and -1.7, respectively. Between 1985 and 1992 per capita GDP growth was _l U g lower but still impressive (7.4 percent a year) while the Poverty has declined dramatically since poverty elasticity was (slightly) positive, implying that the start of reformscie . .the number of poor people increased during this period. Share of population (percent) Poverty in China is a rural phenomenon. Even in 50 1981 just 0.3 percent of the urban population lived in absolute poverty, while 28.0 percent of the rural popu- 40 lation did. Thus rural growth is likely to be more impor- tant to reducing poverty than aggregate growth, 30 .> especially since rural-urban migration is limited. In fact, Higvher poverty Line during 1991-95 the poverty elasticity of rural per 20 capita income growth was high and did not display the variation observed for per capita GDP growth. But 10 when rural income growth stagnated in 1985-92, Absolute poverty line poverty alleviation stalled (figure 1.6). When GDP o growth translated into growth in rural per capita 1981 1983 1985 1987 1989 1991 1993 1995 incomes before 1985 and after 1992, however, the poor Note: China's househoLd surveys introduced a more accurate pricing convention benefited substantially (figure 1.7), suggesting that rural in 1990, resulting in a discontinuous series. Also see figure notes at end of chapter. income growth was distributed relatvely evenly. Source: State Statistical Bureau data and WorLd Bank staff estimates. One of the most curious aspects of China's develop- ment during 1985-92-and one that requires further investigation-is the divergence between per capita . . . but the relationship between per GDP growth and personal income growth. Stagnation capita GDP growth and poverty has been in personal incomes during this period affected both unstable rural and urban populations, such that the share of per- Pover0y iniene(lgo asluepoet hacon)sonal incomes in GDP fell from a peak of 60 percent in 1984 to 45 percent in 1993.2 There are several possible 5.5 explanations. If these data accurately depict trends, 5.5 \ a there should have been large increases in enterprise and government savings during this period; available data 5.0 1978-84 do not support this view, however. More likely, per- sonal income growth is being understated (in part \1o985-92 because migrants' expeditures in urban areas are being 4.5 95 * * * \.left out) or GDP growth is being overestimated (proba- bly due to an underestimation of deflators). 4.0 Rural income growth has been vital to reducing 6.4 6.6 6.8 7.0 7.2 7.4 7.6 7.8 8.0 poverty. Disaggregating the effects of growth and redis- Log of GDP per copita tribution on poverty shows that the number of poor in Note: See figure notes at end of chapter. China would have increased by 50 percent in the Source: State StatisticaL Bureau data and WorLd Bank staff estimates. absence of rural growth because of adverse distribu- Richer but Less Equal 11 ftG(WRW1~ - TABLE 1.1 Per capita GDP growth did not always yield Income redistribution simulations: Results for increases in personal incomes ... poverty and inequality, 1990 1990 yuan Indicator Before After 3,000 Gini coefficient 33.9 30.7 Rural 29.6 29.6 2,500 Urban 22.4 22.4 National mean income (yuan) 888 888 Rural 684 753 2,000 Urban 1,457 1,266 Poverty incidence 1,500 (percentage of popuLation) 8.3 6.0 , _ - RuraL 11.3 8.1 Urban 0.0 0.1 1,000 Note: CalcuLations simulate a 10 percent increase in rural incomes through a 15 percent tax on urban incomes and assume no transfer Losses. Source: State Statistical Bureau data and World Bank staff estimates. 500 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 Source: China Staistical Yearbook and World Bank staff estimates. The importance of growth, growth, and more growth ~T.GUE _7 {Absolute poverty incidence (percentage of population) ... but when it boosted rural incomes, 30 poverty declined Population above 25 P iniec w Rural income (1990 yuan) the poverty line (percent) 25 Poverty incidence without rural growth 900 LO0 20 800 Nonpoor (right axis) 95 15 Actual poverty incidence 700 e Atapoetiniec 601 /sP 4 90 j 010 Rural income (left axis) 85 5 500 400 ~~~ ~~~~~~~~80 3001 75 1 1 Xbo9°oX oo59oOw oo59Ffi A9i°ot 9t 9> 9 9> 9w 9 l Note: The figure compares actual trends in poverty incidence with hypo- 200 70 theticaL trends in the absence of ruraL income growth. The calculations take 1981 1983 1985 1987 1989 1991 1993 1995 actual distributionaL changes during the period as a given but impose zero growth on mean incomes starting in 1981. Source: China Statistical Yearbook and World Bank staff estimates. Source: State StatisticaL Bureau data and WorLd Bank staff estimates. tional changes (figure 1.8) Since the start of reforms tive effect such shifts would have on growth, China there have been only two years when distributional should raise rural incomes through growth rather than shifts appear to have favored the poor-1985 and through redistribution. In this regard measures to aug- 1990-and these are likely to be measurement effects ment poor people's assets (land and human capital) are because there were large adjustments to the State essential to reduce poverty and to achieve a more equal Statistical Bureau's household surveys in both years.3 distribution of income. Still, well-targeted programs will These experiences suggest that redistributive policies continue to be needed to reach those who may be should remain secondary in China's poverty reduction bypassed by the forces of growth. Thus policies should strategy. Given the political difficulties associated with continue to improve the health and education of the poor, effecting large distributional shifts and the possible nega- facilitate access to markets, and enhance labor mobility. 12 Sharing Rising Incomes: Disparities in China A simple calculation showing the effects of income nationaL accounts data shows the same ratio rising from 61 percent in redistribution from urban to rural areas demonstrates 1984 to 68 percent in 1993. 3. In 1985 the ruraL sampLe survey was doubLed in size and the the limits of redistributional policies (table 1.1). If 15 per- concept of income became more comprehensive. In 1990 changes were cent of 1990 urban incomes had been redistributed to made to the valuation of own-grain consumption. rural residents, the incidence of poverty would have fallen from 8.3 percent of the population to 6.0 percent Figure notes and the Gini coefficient would have dropped from 33.9 ton30.7. Buti theffsamenrelts ould have broppee achied i9 Figures 1.1. and 1.2 The countries in the figure are chosen Largely to 30.7. But the same results could have been achieved in on the basis of availabiLity of comparabLe data, but also with a view just two years if the incomes of the bottom decile of the to representing different regions. Comparable statistics on income dis- rural population had grown by 5 percent a year. What tribution are still not common and restricted the number of countries actuall3and 1995, in fact, that could be incLuded. All Ginis shown are based on income (not actually happened between 1993 ana 1995, m ract, expenditure) distributions. China data are based on WorLd Bank staff closely mirrored the results of this simulation: broadly estimates. Data for aLL other countries are for years between 1988 and based growth in rural incomes during those two years 1992. Figures 1.4 and 1.5 The incidence of poverty is caLcuLated by lowered the incidence of poverty from 8.2 to 5.7 percent applying the poverty Line to a constant price (1990) distribution of of the population, with modest declines in inequality. income per capita. The ruraL and urban consumer price indexes are used to convert current income into constant 1990 prices. Because the ruraL consumer price index is availabLe starting onLy in 1985, the Notes ruraL retaiL price index is used for previous years. The absolute poverty Line, estabLished at 318 yuan in 1990 prices, reflects the income 1. The density distributions used to analyze these periods were required to meet minimum nutritionaL (2,100 caLories a day) and non- generated by software designed to process distribution data-the Gini food requirements (see WorLd Bank 1992) and corresponds to about TooLPak-deveLoped by Yuri Dikhanov of the World Bank. State $0.70 a day in 1985 purchasing power parity (PPP) doLLars, using data StatisticaL Bureau data in the China Statistical Yearbook incLude tabu- avaiLabLe in the Penn WorLd TabLes (see Summers and Heston 1991). Lations for the share of households with per capita income within a The higher poverty Line is set at 454 yuan in 1990 prices, equivalent range, for ruraL househoLds; and average per capita income for each to $1 a day in 1985 PPP doLLars. Given this report's focus on income decile (each 5 percent starting in 1989) of househoLds, with corre- inequaLity, the $1 a day standard was appLied to the income distrib- sponding share of totaL income ranked by per capita income, for urban ution even though the international standard deveLoped by the WorLd househoLds. The computations here convert househoLd distributions Bank to monitor progress in poverty reduction appLies the poverty into popuLation distributions based on househoLd size per income cat- Line of $1 a day (in 1985 PPP doLLars) to consumption expenditure. egory, shown in the China Statistical Yearbook for the urban survey and In the absence of a consumption distribution for China, the Latter supplied by the State StatisticaL Bureau for the ruraL survey (for 1985, methodology involves shifting the income distribution by the aver- 1990, and 1992-95, with interpoLations for intervening years). age ratio of consumption to income (see WorLd Bank 1996e and Ahuja Incomes are defLated using the urban or ruraL consumer price index and others 1997). Doing so yieLds accurate resuits so Long as the slope (except for pre-1985 ruraL data, which were defLated by the ruraL retaiL of the Lorenz curves for consumption and income at the poverty Line price index). RuraL and urban data are aggregated into the nationaL are the same, which appears to be the case for 1992 (a year for which distribution using popuLation data (based on registration status) from consumption expenditure data were avaiLable). In 1995 there were the China Statistical Yearbook. 170 miLLion peopLe with incomes beLow $1 a day (in 1985 PPP doL- 2. PersonaL incomes are caLcuLated using househoLd survey data. lars) but as many as 270 miLLion who consumed Less than $1 a day (in The State StatisticaL Bureau's caLcuLation of personaL incomes from 1985 PPP doLLars). Richer but Less Equal 13 e' IN, Growl'ng art.:P Rural-Urban and Coastal-Intefior Gaps look at the components of the worsening 44kwnational income inequality reveals unique features in China's income distribution and points to the unfinished nature of transition. The widening gulf between rural and urban incomes is the biggest contributor to increased inequality. Regional disparities are responsible for a smaller but growing portion of inequality. The rural-urban divide is growing The income gap between China's rural and urban popula- tions is large and growing. According to State Statistical Bureau data, rural-urban disparities accounted for more than one-third of inequality in 1995 and about 60 percent of the increase in inequality between 1984 and 1995 (fig- ure 2.1). Adjusting these data for some of the shortcom- ings noted in box 1.1 reveals an even starker picture. Adj'usted, rural-urban disparities accounted for more than 50 percent of inequality in 1995 and explain 75 percent of 15 Rural-urban disparities account for the Rural per capita incomes are plummeting bulk of the increase in inequality relative to urban per capita incomes, 1978-95 Rural-urban income ratio Unadjusted (original) income 80 Theil index 0.25 70 Contribution to change / in inequality between Rural-urban 0.20 1984 and 1995 inequality 60 Constant 1978 prices 0.15 5- Intraurban 0.10 21 ~~~~~~~~~inequaLity urn e 40 0.05 18. ~~~~~~~~~Intrarurat inequaLity 30 1978 1980 1982 1984 1986 1988 1990 1992 1994 1984 1995 Note: Rural incomes deflated using the rural consumer price index for 1985-95. Pre-1985 rural incomes deflated using the ruraL retail price Adjusted (revised) income index. Urban incomes deflated using the urban consumer price index Source: WorLd Bank staff estimates based on State StatisticaL Bureau data. Theil index 0.35 0.30 Contribution to change the differential increases in the cost of living between in inequality between urban and rural areas. But even the deflated series 0.25 1984 and 1995 RuraL-urban reveals an unmistakable trend. Rural incomes grew 0.20 inequatity rapidly during the early years of reform but in 1985 0.15 74.4 began to trail increases in urban incomes. This trend Intraurban reversed only in 1995. 0.10 3%inequality Two other variables affect the accurate assessment of 0.05 16.2 IntraruraL rural-urban income disparities, and both have been 0 1984 1995 incorporated in the adjusted data in figure 2.1 and table Note: See figure note at end of chapter. 2.1: cost of living differences between rural and urban Source: World Bank staff estimates based on State Statistical Bureau data. areas and the underestimation of both rural and urban in-kind income.1 Rural incomes were adjusted to the increase between 1984 and 1995. The data adjust- include imputed rent and urban incomes to include in- ments yield two important changes: they lower inequal- kind income for housing, education, health care, pen- ity within rural and within urban areas but maintain the sions and other subsidized services. In addition, a 15 trend increase, and they magnify rural-urban dispari- percent cost differential was introduced between urban ties. The overall impact of the changes is an increase in and rural areas. These adjustments lowered rural total inequality. incomes to 31 percent of urban incomes in 1990-sub- China's rural-urban income gap is large by interna- stantially less than the 50 percent suggested by official tional standards. Data for thirty-six countries show that data.2 The adjusted data also yield much higher urban incomes rarely are more than twice rural national inequality (as measured by the Gini coefficient) incomes; in most countries rural incomes are 66 percent because urban income increases more than compensate or more of urban incomes (Yang and Zhou 1996). In for the higher cost of living in urban areas. China rural incomes were only 40 percent of urban The magnitude of the gap between China's rural and incomes in 1995, down from a peak of 59 percent in urban incomes points to imperfect mobility in factor 1983 (figure 2.2). These figures do not take into account markets, especially for labor. Despite increasing accom- 16 Sharing Rising Incomes: Disparities in China modation of the swelling demand for rural emigration, and 1990 almost certainly represent measurement impediments to labor mobility remain. These are moti- effects because there were large adjustments to the vated by the government's desire to control the pace of State Statistical Bureau's household survey in both migration and ensure grain self-sufficiency. The costs of years. relocation, lack of job information, absence of a hous- This section examines the effect data adjustments ing market, and limited access to social services in have on urban and rural inequality: corrections are urban areas pose additional constraints to migration. made to coverage, valuation, and price differentials.3 Meanwhile, government policies continue to prop up Revisions to the rural household survey data raise the urban standards of living. Urban citizens are subsidized mean income and reduce inequality but do not alter the in a variety of ways, including through the absence of finding that overall inequality increased between 1985 hard budget constraints for state-owned enterprises and 1990. Similarly, incorporating in-kind income (primarily to protect urban jobs), low-cost capital for yields substantially higher urban incomes that are more urban enterprises, low-cost housing for urban residents, equally distributed, but urban inequality clearly rose and generous pensions and health insurance schemes. between 1990 and 1995. Enterprise and financial sector reforms and fiscal con- straints are challenging these acquired rights: some in- kind benefits have been eliminated while others are 0 t being monetized, as workers now pay higher rents and Rural and urban inequality have increased contribute more to their pension and medical benefits. steadily since reforms began This may account for part of the observed increase in Rural inequality index the rural-urban income gap in official data. 0.35 0.30 The magnitude of rural and urban Gini inequalities depends on how incomes 0.25 coefficient are measured 0.20 According to official data, both rural and urban 0.15 Theil inequality increased steadily between 1981 and 1995 0.10 index (figure 2.3). The urban Gini coefficient increased from 17.6 in 1981 to 27.5 in 1995, although it dropped dur- 0.05 ing the recession years of 1989-91 and in 1995. The o rural Gini increased from a much higher base of 24.2 1981 1983 1985 1987 1989 1991 1993 1995 in 1981 to 33.3 in 1995. It dipped in 1985 and in 1990 Urban inequality index and has stabilized since 1993. The declines in 1985 0.35 TABLE 2.1 0.30 Rural-urban income gap and inequality with data 0.25 adjustments, 1990 0.20 Gini Contribution coefficient Rural-urban National to national 0.15 income ratio Gini inequality Meassure (percent) coefficient (percent) 0.10 Official data 49.5 33.9 29.5.9h With 15 percent 0.05. Theii higher cost of living in urban areas 56.9 31.9 20.5 0 Plus in-kind incomes 30.5 40.6 51.8 1981 1983 1985 1987 1989 1991 1993 1995 Source: State Statistical Bureau urban household survey team and World Bank staff Source: World Bank staff estimates. estimates. _________________________Growing_Apart:_Rural-Urban_and_Coastal-Interior_Gaps_17 Growing Apart: Rural-Urban and Coastal-Interior Gaps 17 Rural incomes revaLued (based on poverty lines) to measure the local cost of the same standard of living everywhere.5 Official data from the rural household surveys prior to To assess the effect of these data adjustments, 1990 rely on administrative planning prices for the valu- inequality indicators were calculated for each of three ation of in-kind income from consumption of own-farm income definitions (figure 2.4). The first (original production. This approach undervalues a large compo- income) is the State Statistical Bureau's net income mea- nent of income-nonmarketed home production of sure direct from its data files. The second incorporates grain-and at a rising rate over time. According to stan- imputed rents and the revaluation of grain income from dard definitions, 21 percent of rural incomes in 1985-90 own production. The third uses the new cost of living in the four-province data set (Guangxi, Guizhou, deflator as well. Although inequality increased during Guangdong, and Yunnan) came from grain production, 1985-90 for all three income definitions, the adjusted of which 80 percent was the imputed value of consump- tion from own production.4 Another problem is that the 14URIP incomes used in the State Statistical Bureau's tabulations Lorenz curves for China's rural south do not include imputed rents for housing and consumer converge once data have been adjusted, durables. Past work also has ignored spatial differences in 1985 and 1990 the cost of living. Unadjusted (originaL) income To correct for these shortcomings, in-kind grain Percentage of income income was revalued at median local (county-level) sell- 100 ing prices for grain, as determined from primary house- hold data. The administrative prices conventionally used 80 for valuation were 72 percent of the median selling price in 1985 but had fallen to 48 percent by 1990, resulting in 60 serious undervaluation of grain incomes. Other adjust- 40 Original 1985 data ments were made to impute rents for housing and con- 40 sumer durables based on the asset valuations available in Origina[ 1990 data the primary survey data. And new province-level spatial 20 and intertemporal cost of living indexes were constructed 0 0 20 40 60 80 100 Poorest percentiles of people Changes in inequality are much less Adjusted (revised) income pronounced for adjusted data, 1985-90 Percentage of income Gini coefficient 100 35 Unadjusted (original) income 80 New valuation methods 60 30 40 Revised 1985 data Revised 1990 data 20 , 2>c 4.0 income in total income, but it does change the relative 250 (right axis) 35 contributions of different sources within farm incomes 200 Cultivated land 2K.E Fishpond Hilly land Source: Ravat6on and Chen 1997. Understanding Inequality 37 are more likely to attend primary school, and women .. are more likely to have paid employment. Yet alongside persistent problems such as inadequate access to social ~~~ ~~~~ ~services for" women in poor areas, new problems are emerging with deeper economic reforms. In fact, unfet- tered market orientation is threatening past achieve- ments in gender equality and reinforcing a cultural predisposition toward differential treatment of men and women. For example, if reproduction and child -~~~~~ ~care are exclusively female responsibilities, women will earn less in the labor market and parents will have less incentive to educate girls because expected returns will be lower than for boys. In turn, less-educated women |i4 | CG twill earn less in the future. Thus income inequality between men and women is exacerbated by gender bias in household decisions about investment in children Iand by occupational segregation and wage discrimina- tion in the labor market. Here we use household data from Sichuan and ~~~~- ~~~~~~~ ~~Jiangsu to test for gender discrimination at the house- fits of land access accrue to the household that maintains hold level by examining gender bias in the household it. Moreover, the administrative costs of operating the allocation of food, calories, health, and education, since system have been minimal because land redistribution these expenditures influence children's survival proba- was historically achieved in a single step. Finally, macro- bility and the welfare outcomes of surviving children; economic fluctuations do not affect the level of benefits and selective abortion of female fetuses, leading to because the system does not depend on fiscal revenues. skewed sex ratios at birth (Burgess and Zhang 1996). Most policies to improve nutritional status focus on Three key results emerge from the analysis of household transferring income or food. A third alternative- spending on food, education, and health. First, there is providing rural people with opportunities to produce no evidence of gender bias in the allocation of food and food-appears to have been quite successful in China, calories, suggesting that parents feel unconstrained in where high nutritional status has been obtained with- this area thanks to universal access to and egalitarian out resorting to large-scale direct nutrition interven- distribution of land. Second, there is evidence of a sig- tions. Because growth has also benefited the poor, it has nificant bias against girls (0-4 age group) in the alloca- improved their nutritional welfare. But the pattern of tion of health goods in the poorer, less diversified growth and possibly growth rates may have been less province (Sichuan), but not in the richer, more diversi- favorable in the absence of a relatively even distribution fied one (Jiangsu).20 Third, overall investments in of assets in rural China.'9 Although the current distrib- human capital are higher for boys than girls, with both ution of land may not be economically optimal, the provinces showing a pro-male bias in expenditures for equity and social protection features of the system serve secondary education. Taken together, the health and important functions. Alternatives to this system should education results suggest that discrimination tends to explicitly consider measures to compensate those who focus on expenditures when parents have to make dis- would be made nutritionally vulnerable by its absence. crete and costly decisions regarding investment in their children. Women are increasingly at risk Income growth and diversification appear to erode gender discrimination. This result is obtained when the The status of Chinese women compares favorably with rural samples for both provinces are split into poorer that of women in other Asian countries. Chinese girls and richer subsamples and the analysis is extended to 38 Sharing Rising Incomes: Disparities in China TABLE 3.11 Mortality rates and sex ratios in Sichuan and Jiangsu, 1990 RuraL Sichuan Urban Sichuan RuraL Jiangsu Urban Jiangsu Mortality ratea Sex Mortality ratea Sex MortaLity ratea Sex MortaLity ratea Sex Age Male FemaLe ratiob MaLe FemaLe ratiob Male FemaLe ratiob MaLe FemaLe ratiob At birth Reverse survival methodc 111.9 110.2 115.5 112.2 Actual 115.8 110.2 120.8 116.0 0 25.1 30.0 112.6 29.2 27.8 107.7 15.3 15.5 115.5 12.9 12.6 112.2 1 4.3 5.5 113.7 3.6 3.6 107.2 3.1 2.8 113.7 1.8 2.0 110.8 2 2.7 3.2 111.3 2.6 2.5 105.8 2.5 2.1 111.3 1.6 1.3 108.8 3 1.5 1.7 111.5 1.4 1.5 106.5 1.4 1.3 110.0 1.0 0.8 106.8 4 1.0 1.0 110.4 0.9 0.9 106.2 1.1 0.9 109.3 0.8 0.9 106.8 0-4 10.3 11.8 111.8 7.0 6.7 106.6 5.1 4.8 112.1 3.8 3.6 109.1 5-9 1.2 1.0 109.4 0.9 0.5 106.4 0.7 0.5 108.3 0.6 0.4 106.0 10-14 1.0 0.7 106.4 0.8 0.5 105.4 0.4 0.4 106.6 0.4 0.3 106.8 15-19 1.3 1.1 104.3 1.1 0.7 107.3 0.8 0.8 103.8 0.5 0.4 112.8 TotaL 7.4 7.2 106.6 8.5 7.5 108.7 6.8 5.9 102.2 5.2 4.8 109.5 a. Per 1,000 Live births. b. Number of males per 100 females. c. Because the one-child policy creates an incentive to underreport femaLe births, the sex ratio at birth was aLso calcuLated using the reverse survival method. Assuming that there is less of an incentive to underreport female deaths than surviving femaLe children, this method is deemed to yield a more reliable estimate. The method estimates the number of maLe and female births by comparing the number of deaths of maLe and femaLe chiLdren at birth with the totaL number of maLe and female chiLdren surviving at the end of the first year of Life. Source: Burgess and Zhuang 1996 (based on 1990 census data). urban Sichuan.21 The pro-male bias in health good with the results reported above for health expenditures: expenditures is more pronounced for poorer and less there is no discernible gender difference in mortality diversified households in rural Sichuan; such bias rates in rural Jiangsu, but the female mortality rate is sig- remains insignificant in the split samples in urban nificantly higher than the male rate in rural Sichuan. Sichuan and rural Jiangsu. For education goods, both However, sex ratios in the first year of life are more discrimination results detected in the overall sample skewed in rural Jiangsu (115.5) than in rural Sichuan (10-14 age group in Sichuan and 15-19 in Jiangsu) (112.6). This finding is inconsistent with both the mor- were more prominent in the poorer and less diversified tality and the expenditure results and suggests that the subsample; there is no evidence of bias in the richer and higher sex ratio in rural Jiangsu must be due to differen- more diversified subsample. For education services, the tial treatment prior to the first year of life-providing pro-male bias in post-secondary education spending support for the hypothesis that wealthy Jiangsu resi- detected in the overall sample for both provinces carries dents are more likely to abort female fetuses because over to the poorer subsample. This discrimination dis- they have greater access to in utero sex detection meth- appears for the rich subsample in Jiangsu, but a clear ods. After birth, there is no evidence of discrimination in pro-male bias remains in Sichuan.22 Thus as household health spending. The pattern in rural Sichuan is entirely budget constraints increase so does discrimination different. The sex ratio at birth is moderately skewed, against girls. Removing incentives to skew investments suggesting limited differential treatment prior to birth, in secondary and tertiary education toward boys would but it increases significantly in the first year of life as a increase the earning potential of the other half of the result of gender biases in mortality that appear to be dri- population. ven partly by discrimination in health spending. The 1990 census data show that detected biases in Gender gaps appear in rural education outcomes as household spending on health and education corre- well. Rural enrollment is markedly higher for boys than spond to observed biases in age-specific mortality and for girls across all age groups (table 3.12). The gaps are educational attainment (table 3.11). Rural mortality relatively small for the 6-9 age group but pronounced rates and sex ratios (males per 100 females) for the first for the 15-19 age group. These are consistent with ear- year of life are revealing. The first finding is consistent lier findings of a significant pro-male bias in education Understanding Inequality 39 TABLE 3.12 School enrollments in Sichuan and Jiangsu, 1990 (per 100 of same sex in age group) RuraL Sichuan Urban Sichuan Rural Jiangsu Urban Jiangsu Age Male Female MaLe Female MaLe Female Male FemaLe 6-9 80.1 76.6 79.8 79.8 89.6 87.1 84.7 84.6 10-14 83.1 73.2 89.3 86.9 95.3 88.9 96.9 96.1 15-19 25.7 16.1 38.2 33.9 35.0 22.0 55.4 48.4 Source: Burgess and Zhuang 1996 (based on 1990 census data). TABLE 3.13 Off-farm employment by gender in Sichuan and Jiangsu Sichuan Jiangsu Share of Labor force Years of Share of Labor force Years of Age and gender working off-farm (percent) schooLing working off-farm (percent) schooling Under 20 Male 9.2 7.0 40.8 8.4 FemaLe 4.7 6.3 38.3 7.2 20-29 MaLe 18.8 7.6 48.6 8.7 Female 6.8 6.7 35.4 7.1 30-54 MaLe 15.9 6.3 39.2 7.4 Female 2.5 3.4 16.6 3.5 Over 54 Female 8.2 4.1 20.1 4.4 Male 1.7 0.8 3.2 0.6 Source: Burgess and Zhuang 1996. in rural areas for this age group. As expected, enroll- between men and women, or are other forces at work? ment gaps are less pronounced in urban areas. On average, Chinese women earn between 80 and 90 The finding of gender discrimination in household percent of what men earn-much higher than the health and education expenditures is important. Lower worldwide average. There is, however, evidence of investment in girls in an environment of increasing occupational segregation in China; women are dispro- returns to human capital portends a widening gender portionately represented in lower-paying jobs. Some gap in the workplace. Data indicate that differential studies also find evidence of a persistent and unex- treatment of men and women translates into different plained gap between male and female wages, even after job market outcomes (table 3.13). Lower investment in controlling for worker characteristics, suggesting that girls' education appears to restrict their access to men and women do not get equal pay for equal work (higher-paying) off-farm employment. Gender discrim- (Bauer and others 1992; Meng and Miller 1995; Yang ination in intrahousehold allocation is influenced by and Zax 1996). Moreover, this unexplained wage gap income, however, and so is amenable to change through is high by international standards. It appears more pro- the growth process or targeted government policies. In nounced in nonstate firms than in state enterprises. fact, national data show a narrowing of the gender gap Expanding employment in nonstate firms and waning in educational attainment at all levels of schooling egalitarian wage policies in state firms might increase (table 3.14). the discriminatory component of the wage gap and fur- Do unequal outcomes in the workplace simply reflect ther erode women's relative incomes. In nonstate firms the differential levels of educational attainment there is also an emerging bias against hiring women of 40 Sharing Rising Incomes: Disparities in China ment has profound consequences not only for women's TABLE 3.14 direct contribution to economic growth but also for (percentage of totaL students) their position within the household and status within society. Higher levels of maternal education and a Level 1980 1990 1995 stronger voice for women in household allocation deci- Primary 44.6 46.2 47.3 sions have beneficial effects on the health and nutri- VocationaL middLe 32.6 45.3 48.7 ReguLar secondary 39.6 41.9 44.8 tional status of children, which are important Specialized secondary 31.5 45.4 50.3 determinants of societies' future productivity. Higher education 23.4 The case for public action to eliminate gender dis- Soulrce: Chins Statistical Yearbook 1996. crimination in access to health, education, and jobs is child-bearing age. Female university graduates in search clear on both growth and equity grounds. It is difficult of employment appear to be increasingly bypassed in to legislate or interfere with intrahousehold resource favor of their male counterparts (Riley 1995). allocation decisions, but policies can target girls' educa- Restructurings in state firms are resulting in layoffs, tion grants, for example. Labor markets are more furloughs, and early retirement. Evidence suggests that amenable to public action, which should aim to elimi- women bear the brunt of all three adjustments. A 1995 nate discrimination on the basis of gender. Policies survey of seven provinces and four cities found that 56 should equalize the retirement age for men and women, percent of laid-off workers were women. A similar sur- remove gender biases in nonwage benefits such as hous- vey in 1996 found that the share of women in total lay- ing, and eliminate wage differentials in the marketplace. offs (60 percent) in five provinces was much higher than These moves would also help reduce intrahousehold the ratio of women in the labor force (37-40 percent). gender bias with respect to investing in children. The This disparity may partly reflect the fact that sectors difficult question is who should pay for the costs asso- that are experiencing difficulty, such as textiles, employ ciated with bearing and rearing children; possible mainly women. It also represents a rational response answers include the mother, through lower pay or from the perspective of maximizing household welfare, reduced employment opportunities, the parents, or driven by existing biases in the allocation of housing. A society at large. These are complex decisions whose survey of five cities found that twice as many men as answers should reflect societal consensus. But until par- women had housing assigned by their work units. If lay- enting truly becomes a partnership between men and offs also lead to loss of housing, it is clearly sensible for women and women have an equal voice in formulating individual households as well as society at large to pre- societal preferences, the absence of government leader- serve the jobs held by men. Among women this trend is ship will mean that women will continue to bear the full not limited to older employees, as women are increas- cost of raising children while benefits accrue to all of ingly being laid off or asked to retire very young. The society. statutory retirement age in China is 55 for women and 60 for men. Thus early retirement implies that women Notes are leaving the labor force in their forties and sometimes even earlier. A 1996 survey of 224 enterprises in Jiangxi 1. Background papers were prepared on various aspects of China's income inequality using micro-LeveL data from the State Statistical Province found that 53 percent of laid-off women had Bureau's househoLd surveys. RavaLLion and Chen (1997) use a multi- been asked to retire, and their retirement ages were year data set that aLLows for examination of changes in inequality and mostly between 30 and 40. In turn, this means that their determinants. Papers by Robin Burgess use 1990 househoLd sur- vey data (both rural and urban) from Jiangsu and Sichuan provinces. retired women will have lower pensions. WhiLe changes over time cannot be inferred from a singLe-year survey, International experience shows that growth alone is the inclusion of a reLatively weaLthy coastaL province (Jiangsu) and a insufficient to eliminate gender discrimination. In poor and popuLous interior province (Sichuan) aLlows for a rich set of results on the determinants of income, welfare, inequality, and gen- China, despite considerable gains in educational attain- der bias. Both data sets have been adjusted to value own-grain con- ment and rising incomes, the reforms underpinning the sumption of households at market prices; Ravallion and Chen also country's remarkable growth performance may be introduce regional prices into the analysis and revalue housing and eroding th relativepositionofwomen. Thisdeconsumer durables to include the amortized flow of services rather eroding the relative position of women. This develop)- thncretasexne. n than current cash expenses. Understanding Inequality 41 2. To examine the effect of ownership on income, ownership forms cent of the totaL popuLation and 17.4 percent of the landless popuLa- in the urban data set are categorized into state, coLLective, and pri- tion is poor. vateLy owned work units. Workers not empLoyed by state or coLLective 15. Because McKinLey and Griffin incLude the Landless in their cal- units are categorized as empLoyees of the private sector. cuLations, however, their Gini is higher. 3. As an extension of the anaLysis, the shares of schooLing and 16. InterestingLy, and unLike other countries, the distribution of empLoyment by ownership were incLuded as explanatory variables. The Landed weaLth is not a good predictor of the distribution of other resuLts for 1991 and 1995 further demonstrate the strong correLation assets. In fact, househoLds that hoLd Less Land (in terms of vaLue) tend between tertiary education and Labor income, and the high return to to hold relatively more other assets. private sector jobs. 17. There is strong evidence for this in Sichuan (Burgess 1997). 4. Another pLausibLe expLanation for increasing returns to state- 18. The same is true of fishponds, whose contribution to inequaL- owned units is the gradual monetization of in-kind income. ity was stiLL low in 1990 (1.4 percent for adjusted income) but which 5. In a regression of urban income growth on initial income, a accounted for 23 percent of the increase in inequaLity between 1985 dummy variabLe for Location in a coastaL province, and the share of and 1990. empLoyment by ownership, ownership coefficients were found to be 19. Interestingly, anaLysis suggests that given incompLete mar- smaLL and insignificant. kets, making the distribution of Land Less egaLitarian wouLd hamper 6. This section draws on Burgess (1997). productive efficiency, equity, and weLfare, suggesting that Lump-sum 7. The anaLysis was done using both the Gini coefficient and Log Land redistribution in ruraL China may represent a rare exampLe of a deviation (or TheiL index), but because the conclusions are robust to redistributive poLicy intervention that enhances both equity and effi- the choice of inequality measure, onLy the resuLts of the decomposi- ciency (Burgess and Murthi 1996). ALthough this does not mean that tion of the Gini coefficient are reported here. the overaLL aLLocation of resources in rural China is optimal, it does 8. The question of transient poverty, as distinct from chronic suggest that the deveLopment of factor markets (particuLarLy for Labor) poverty, is an important one and has received some attention in empir- is likeLy to be more important than Land redistribution in increasing icaL work on China (Jalan and RavaLLion 1996). returns to Labor and improving househoLd weLfare. 9. The first year of the data set is 1988. The tendencies identified 20. These findings point to the absence of discrimination in the here wouLd likeLy be stronger if the anaLysis could be carried out start- aLLocation of heaLth services for both provinces. However, the anaLy- ing with the launching of urban reforms in 1985. sis Likely has Limited power to pick up discrimination in this area, 10. The anaLysis here is based on data provided by the State given the heavy subsidization of heaLth services in 1990. ALso, if Statistical Bureau, as described in the note to tabLe 3.5. attending a cLinic is not costly but drugs and other health goods need 11. Knight and Li (1996) show that Large differences in educa- to be purchased in the market, a preference may be expressed more tionaL attainment remain even after controLLing for different charac- forcibly in decisions to purchase heaLth goods rather than in decisions teristics (sex, age, minority status) of ruraL and urban househoLds. to attend clinics. 12. RavaLLion and Chen (1997) show that the share of inequality 21. The sampLes were sptit according to expenditures (per equiv- attributed to any income determinant is the product of three things: aLent adult) and the share of off-farm income in net income. the partiaL regression coefficient of income on that determinant, the 22. As regards education services, the pro-maLe discrimination simpLe correLation coefficient with income, and the ratio of the stan- detected in the full sample for the 15-19 age group in Sichuan appears dard deviation of that determinant reLative to the standard deviation to be more pronounced for more diversified households; this might of income. reflect the fact that it is mainly diversified househoLds that engage in 13. The remainder is made up of housing, fixed assets and finan- post-secondary education. Less diversified households aLso exhibit a cial assets (McKinLey and Griffin 1993). pro-maLe bias in investments in secondary education services that was 14. By the standard deveLoped in the nationaL survey, 12.7 per- not apparent in the fuLL sampLe. 42 Sharing Rising Incomes: Disparities in China How Policies A!fct Individual Welre eople's different endowments suggest that # - innequality in outcomes is not only unavoidable but also that it can help nourish creativity and spur _ v growth. As a result most societies tolerate some inequal- ity in income. How much depends on the historical and cultural factors shaping each society's preferences. China's income inequality may continue to rise as the country's transition unfolds. But increasing inequality 11+. >0need not undermine growth or social harmony-so long as growth is broadly based, policy biases are eliminated, opportunities are equalized, and the poor and vulnerable are protected. This chapter shows how policies can har- ness growth to improve the welfare of the poor and curb damaging increases in inequality (figure 4.1). p4'4 t l -43 Where the poor are, 1995 Share of population (percent) 0.6 National 0.5 0.4 0.3 Near poor l an 0.2 (8 8%) 0.1 AbsoLute poor The ch (5A7bo poo % \ Yuan Source: World Bank staff estimates. Eliminating policies that favor that could be targeted to more needy populations, some the better-off of these policies directly lower the welfare of rural resi- dents. Others do so directly. Adjusting these policies Despite its increase over the past fifteen years, income would more likely affect middle- than upper-income inequality remains moderate in China. Unlike in some individuals. Latin American countries, wealth in China is not highly Second, the coastal bias in economic policies should concentrated, and the gap between the haves and the be removed. The natural and human capital advantages have-nots is not large enough to threaten the social of the coastal provinces are sufficient to attract foreign order or warrant remedial policies. The per capita investment without preferential policies. The govern- income cutoff for the richest 5 percent of the population ment is already moving in this direction by eliminating (3,180 yuan in 1990 prices) is exactly ten times the tariff and tax benefits for foreign investors. The impact absolute poverty line (318 yuan in 1990 prices). Thus on regional growth patterns of policies that favor the public policy should continue to focus on fostering con- interior is more complex. Research is needed to deter- ditions for people at the lower end of the distribution to mine the potential effectiveness of a package of such participate in economic growth. policies. International experience with regional develop- Some policies, however, exacerbate the gap between ment efforts generally has been negative, but there has the rich and the poor. Eliminating policies that favor the been little systematic analysis of this important issue. rich would help reduce inequality. So would strength- There is, however, substantial evidence that well- ening policies that tax the rich and that guard against designed intergovernmental grants can reduce public unscrupulous wealth accumulation (box 4.1). Two expenditure disparities across localities. The equalizing efforts are crucial in this regard. nature of China's current interprovincial transfer scheme First, the urban bias in current policies should be has been eroding, and the government plans to reform it redressed. Housing, food, migration, credit, state (World Bank 1995a). Income inequalities that result employment, and other policies provide de facto subsi- from the unequal size of provincial purses could be dies for urban residents. By preempting public resources addressed by a new transfer scheme based on provincial 44 Sharing Rising Incomes: Disparities in China is now concentrated in remote upland areas where BOX 4.1 people eke out a living in the face of severe resource ~~ c½~~~~71'~~~7 ~ constraints (World Bank 1997b). Although these poor have land use rights, in most cases the land is of such poor quality that it is impossible to achieve subsistence I~~~i~~ ~~ ~~~ ~~ crop production. Consequently, most poor people consume grain and other subsistence foods beyond their production levels and suffer when the prices of expenditur needs and revenue generation. Progres these products increase. The poorest households often are further disadvantaged by high dependency ratios, t a mc d fill health, and low educational attainment. In many of China's poorest towns and villages at least half of the Protecting the absolutep rboys and nearly all of the girls do not attend school and will be illiterate. The poorest households have nei- ther the physical nor the human assets to reap the ben- efits of growth. Do current programs reach the poor? The Chinese government is committed to reducing remaining por,trgtd oeryineretin wl sgpoverty, and most government ministries and agencies have special poverty reduction projects. In 1986 the State Council established the Leading Group for ~~ ~ ~ ~ ~~~& #t ~~~~ Poverty Reduction to coordinate poverty initiatives _ ~~~~and to infuse rural social and relief services with a new emphasis on economic development programs in poor areas. To be eligible for development assistance, coun- ~~~ ~~ties were designated as poor in 1986 using county-level ~~~ j ~~~rural income data gathered by the Ministry of ~~e w 4~~~~~~~e~~~ ~Agriculture (box 4.2). The resulting list of 327 poor counties captured many of the poor. But the decision to - ~~~~~~~~~~~~~~focus on counties (rather than townships, for example) expenditure needs and revenue generation. Progress in and to use county-level data to determine eligibility reforming the system has been hampered by political limited the government's ability to target more effec- concerns. Accelerating interprovincial disparities require tively. The switch to State Statistical Bureau data the central government's concentrated effort if the trend (county average rural per capita income) in 1992 is to be checked. improved the information base for targeting, but prob- lems remain: there is substantial income variation within counties and considerable fluctuations in per Protecting the absolute poor capita income over time. Analysis based on the rural household survey data About 70 million Chinese lived in absolute poverty in for the four-province data set described in previous 1995, down from 270 million in 1978. Although con- chapters shows that during 1985-90 roughly half the tinued growth in agriculture and off-farm employ- poor did not live in either the nationally or the provin- ment should raise the living standards of some of the cially designated poor areas (table 4.1).1 This finding remaining poor, targeted poverty interventions will suggests that there is considerable variation in per remain essential for most. Absolute poverty in China capita incomes around the county mean. Indeed, for the How Policies Affect Individual Welfare 45 pooled sample (excluding Guangdong) the standard extensive data.3 In China targeting is geographic deviation of per capita consumption for the designated (based on county means), so household-level fluctua- poor counties was close to the mean. tions in annual per capita consumption will have little A single year is not a useful time period for defining impact on targeting efficiency unless there are risks eligibility for poverty alleviation schemes. Individuals that affect entire communities. may dip below the poverty line in a given year and later rise above it again. As such, they are members of Adjusting the governments approach to the transient rather than the chronic poor. Transient alleviating poverty poverty appears prevalent among the households sam- pled in 1985-90,' suggesting that poverty alleviation As poverty declines, the need for better targeting policies based on consumption (income) levels in any increases. Targeting to the level of townships, or per- one year are less efficient than policies based on more haps even administrative villages, would reduce costs and increase the effectiveness of poverty alleviation pro- grams. Current poverty alleviation criteria are compro- i; ; ; , gmising the government's ability to reach all of the poor. 0> >;N They also raise the cost of lifting an individual out of _ w22~wsy~ poverty because increasingly large numbers of people -g E Ewho are not poor continue to benefit from government programs. The government should also consider refocusing its Do the pooriveidesgnatepoocouniespoverty reduction strategy. Most of the poor now live in remote, sparsely populated regions with low-quality M ~~~~ ~ land. Some will no doubt benefit from rural infrastruc- ture investments, efforts to improve agricultural productivity, and local off-farm employment opportu- nities-important pillars in the government's strategy to combat poverty. In particular, those who fall into poverty because they are exposed to discrete shocks would benefit substantially from opportunities to diver- ~~W~~~& ~~~~ ~ ~ ~ > ~ sify risk through off-farm employment. But returns to interventions that were effective in the past must be declining, given the changing profile of the poor. Thus a renewed emphasis on basic education and health ser- 46ji ~ 4 ~ vices for the poor is essential, combined with help find- ing employment in economically advanced areas ~Y (box 4.3). Evidence suggests that health emergencies contribute _____________________________________ to transient poverty (World Bank 1996b). There is a TABLE 4.1 clear need to ensure essential health services for the Do the poor live in designated poor counties? poor and to strengthen public health programs. (percentage of provincial poor Living in designated poor counties) Chronic poverty in China is highly correlated with poor Province 1985 1990 health, low levels of educational attainment, and illiter- Guangdong 34 42 acy. Poor households should be compensated for the Guangxi 449direct cost-and possibly some of the indirect (oppor- Guizhou 49 53 Yunnan 40 43 tunity) costs-of educating their children. To increase Total 45 48 returns to schooling, labor mobility should be pro- Source: Wortd Bank staff estimates based os State Statistical Bureau data- moted and the quality of education improved. Doing so 46 Sharing Rising Incomes: Disparities in China gBOX 4.3 -,,,- Boosting the potential of ~~~ ~the near poor >~China's "near poor" have incomes above the absolute ~ ~ poverty threshold but are considered poor by most international standards. By this report's definition, the number of people considered near poor dropped from some 200 million in 1981 (25 percent of the popula- tion) to 100 million in 1995 (8.8 percent of the popula- tion) 4 This segment of the population has benefited gg g greatly from reforms in grain pricing and strong growth in off-farm employment. Policies that are beneficial to the absolute poor will also help improve the welfare of the near poor. Increased availability of basic education and health ser- g 4g. vices is essential to ensure that the poor are not left out of the growth process. Access to higher levels of educa- tion, a more accommodating grain policy, greater inte- gration in labor markets, and better-functioning credit markets would further upgrade the living standards of 1~the near poor. Educating the near poor Education is an increasingly important determinant of income. Arresting deterioration in China's income dis- tribution will require ensuring greater equality in access to high school education and above. To this end, the Eai tgovernment should consider providing merit-based assistance to poor families to help defray the increasing costs of higher education. ~-.HDeveloping a more flexibie grain policy Government grain production policies continue to would reduce parents' reluctance to send their children depress rural incomes. In rural China low incomes are to school. Information from household surveys and closely associated with grain production (figure 4.2). special surveys of migrants shows the importance of Higher returns accrue to nongrain agriculture and to remittances to incomes, including those of the poor. The off-farm employment in particular. Survey data from the main constraint to increased migration appears to be four southern provinces show that among the near poor access to information about job opportunities. A recent grain income accounted for nearly half of per capita village-level study on migration flows found that famil- income in 1990. Although grain incomes have increased iarity with previous migrants was the most important substantially, thanks to higher yields and price increases, determinant of migration (Rozelle and others 1997). the potential for further gains in this area is limited. In Expanding the government's already important activi- particular, market prices in China's cities are now close ties in this area offers promise. to-and in some cases even higher than-world market How Policies Affect Individual Welfare 47 Dependence on grain income declines as-- per capita income increases, 1990 Mean per capita income (yuan) , 1i9t The 1 D D R s k 2,500 *p e t i e~i fgnna~ 2,000 a o r e t c w ( r i benefit ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 9s would~M come fro rellcain labr wthi ahii2 4 se 1,500 in g X r lt D D f p n to ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~dcr the state And~ since 1995 th govenor' resonsbil 1,000 ~~ a ~ ~ e~ 500 xrxt & t Le ot 0 10 20 30 40 50 60 tets Share of grain incame in per capita income (percent) Note: Data are for 5 percentile groupings ranked by per capita income for Guangdong, Guangxi, Guizhou, and Yunnan. Incomes refLect the Ravai. ion and Chen (1997) adjustments (see chapters 1-3). s avfodre fa or ielnC aT Solirce: WorLd Bank staff estimates. w ofChia'sow prices for most grains. Grain farmers would benefit from the alignment of procurement prices with (hitherto cern at higher) market prices, more efficient transport and dis- a vaid and w haveto e addressed tribution, more effective fertilizer use, and improved a s agricultural research and extension.' But the biggest benefit would come from reallocating labor within t aJIPesltTenbpq s'i farming and between farming and nonfarming. i~ The government's desire to ensure that China is 95 percent self-sufficient in grain erodes the welfare of r ~ ~ tp n n t~f~ grain producers. This policy has become more varied A tT itv r ;k~4 and less intrusive over time but it continues to restrict ~bl4n farmers' choices. The policy of "protecting arable land" locks certain areas into grain (and cotton) cultivation. In addition, farmers must meet their quota obligations to the state. And since 1995 the governor's responsibil- ity system for grain self-sufficiency has pushed respon- The obvious alternative to grain self-sufficiency is sibility to each subsequent administrative level and increased reliance on food imports. Attention to down to the village (box 4.4). At the same time, author- China's grain policies has generally come from foreign- ity to import grain, previously at the discretion of the ers who are concerned about the missed opportunities coastal provinces, was centralized in Beijing. Such con- for exports to China or about the implications for straints appear to stack the deck so that farmers have world food prices of a more import-reliant China. The little choice except to grow grain. As a result excess effects these policies have on the welfare of China's own labor is used to cultivate grain in areas where returns farmers has received much less attention. China's con- are generally low. Relaxing such policies would benefit cerns about relying on potentially volatile foreign grain farmers by allowing them to engage in higher value- supplies are valid, and would have to be addressed were added activities, or on off the farm. policies to be adjusted. 48 Sharing Rising Incomes: Disparities in China Box 4.5 boost rural incomes if it is properly structured (box BOX 4.5 ~~~~~~~~~~4.5). International experience shows that microfinance s~~. programs can contri'bute to poverty reduction and be sustainable, but only when families are able to invest in productive activities that can generate cash flow for repayment. Thus such programs are likely to be well suited to the near poor but will fail if used to aid the destitute. Integrating Labor markets The benefits of increased labor market integration for the near poor are clear. Despite considerable relaxation in the rules and regulations governing rural-urban migration, forms of control and other impediments remain. Controls in both sender and recipient regions reflect the government's intolerance for "blind" migra- tion that is, migration into cities without a job. Most migrants to China's major cities are forced out by three no's no hukou, no housing, and no job. In addition, the uncertain status of migrants in urban areas, the absence of a housing market, and the unavailability of social services dampen the demand for migration (annex 1). The authorities' desire to control the pace of rural-urban migration is understandable. The potential costs in terms of greater urban congestion, higher inci- ~~~~~ ~~~ dence of crime, and dislocation of established urban workers may be sizable. But it is important to weigh these costs against the considerable benefits of labor ~~~~ ~ ~ ~ ~ ~ ~ ~~ mobility, not just for the individual migrants but also 4~~~~Ai4i for the economies of the host cities and the families left behind. The government could help broaden access to migration opportunities by strengthening job informa- tion networks. Caring for the urban poor Serving the creditworthy The near-absence of poverty in urban China is unusual. In most countries uirban poverty contributes significantly to Increased diversification into off-farm employment will overall poverty (figure 4.3). In China, by contrast, avail- not only help increase the incomes of the near poor but able data indicated that no urban residents have incomes also will reduce their vulnerability to income fluctua- below the absolute poverty line. And in 1995 just 0. 1 per- tions. More education is key for improved market cent of the registered urban population lived below the access, but better rural infrastructure and credit avail- higher poverty threshold, down from a peak of 1.8 per- ability will also help bring markets within reach and get cent in 1989. Low urban poverty reflects China's limited new businesses started. Microfinance, a relatively new urbanization and the continued segmentation of its urban instrument in China, has considerable potential to and rural economies. Not only is urban poverty negligi- How Policies Affect Individual Welfare 49 ble, but urban inequality is also low by international stan- dards. It is likely that both will rise in the future. But if this Unlike in most countries, urban poverty in increase is due to a decline in the rural-urban gap as a China is negligible result of greater labor mobility and increased market inte- Ratio of urban to rural poverty gration, it should not increase overall inequality. (percent) 1.4 Who are the urban poor? 1.2 * Indonesia The characteristics of the poorest 5 percent of urban 1.0 Bangladesh households (ranked by per capita income) can be com- Pakistan . pared with those of the average urban resident to yield 0.8 Thailand X information about the relative urban poor. As table 4.2 0.6 shows, poor urban households have more members and fewer income earners. The drop in female employ- 0.4 X BraziL ment is particularly notable. Members of poor urban 0.2 households are more likely to work in collectives, as 00 1, 0 0 domestics, or be self-employed. But above all, they are o 1000 2,000 3,000 4,000 5,000 6,000 more likely to be unemployed: only 1.8 percent of the GDP per capita (purchasing power panty dollars) Note: Data are for a recent year between 1990 and 1995. Poverty incidence members of the average urban household are waiting is based on nationaL poverty Lines, which vary substantiaLLy across countries. for a job or a job assignment; in poor households the Source: World Bank data. corresponding figure is 6.3 percent. Poor households are underrepresented in knowledge-intensive occupa- in China is 55 for women and 60 for men. About 12 tions and are far less likely to work for the Communist percent of the individuals in the sample changed job party and the government. They are also less likely to status between 1991 and 1995. The bulk of these be employed by the state or by joint ventures and are changes came from the state sector (60 percent), and less likely to have members who are retired. Unlike in they were almost entirely for the worse. Among state other developing and transition economies, retirement employees who changed jobs, less than 30 percent in China does not push people into poverty, reflecting found work in other sectors; the rest retired (45 per- the still generous pensions received by retirees. cent), left the labor force (10 percent), became unem- Information from a survey of five cities (Beijing, ployed (9 percent), or were furloughed (8 percent). Shanghai, Chongqing, Guangzhou, Shenyang) com- New entrants into the labor force went primarily into plements these findings and provides additional private and foreign jobs, reflecting the locus of new insight. The survey found that retirement does not job creation and the continuing decline of state and increase the likelihood of a household falling into collective enterprises. poverty, but unemployment and furloughs do.6 Survey results also show a much higher incidence of unem- Dealing with rising urban poverty ployment than is indicated in State Statistical Bureau data-and one that is rising. Even aside from those China's cities have been changing rapidly and will con- who took early retirement, adding together reported tinue to do so for at least the next two decades. China unemployment and those who were furloughed brings remains underurbanized. This will change, and as it total unemployment to 3.0 percent in 1991 and 8.2 does there will be a substantial transformation of both percent in 1995. the structures and the faces that make up modern Early retirement and furloughs are being used to China. Poverty and unemployment have been almost shed excess workers in enterprises, according to the unknown to China's urban residents, but this too is survey. Among those who had retired since 1991, 10 changing. As wages increasingly reflect productivity percent were in their forties or younger and 38 per- differentials and production structures adjust to cent were in their fifties. The statutory retirement age China's comparative advantage in international mar- 50 Sharing Rising Incomes: Disparities in China TABLE 4.2 Characteristics of the urban poor, by household income Share of household Number per 100 househoLds members (percent) Average Bottom Average Bottom Characteristic income 5 percent income 5 percent HousehoLd members 321.7 383.1 100.0 100.0 Income earners 234.3 209.9 72.8 54.8 Male 118.6 113.9 36.9 29.7 FemaLe 115.7 96.0 36.0 25.1 Employed 185.6 167.7 57.7 43.8 Male 96.6 93.1 30.0 24.3 Femate 89.0 74.7 27.7 19.5 Average age of househoLd members 35.0 33.0 Employer/employment status State 145.9 109.8 45.4 28.7 Collective 26.9 43.8 8.4 11.4 Joint venture or foreign-owned 2.5 0.7 0.8 0.2 Privately owned, self-employed 2.8 8.9 0.9 2.3 Privately owned, empLoyed 1.1 1.7 0.4 0.4 Retirees, reemployed 5.5 1.5 1.7 0.4 Other empLoyment 0.8 1.5 0.2 0.4 Retirees 35.1 25.0 10.9 6.5 Disabled workers 0.7 2.2 0.2 0.6 Household workers 4.3 21.7 1.3 5.7 Waiting for jobs 5.6 21.7 1.7 5.7 Waiting for job assignments 0.4 2.2 0.1 0.6 Students 62.5 86.7 19.4 22.6 Waiting for entry into higher education 0.1 0.1 0.0 0.0 Other 27.4 55.8 8.5 14.6 Sector of employment 185.6 167.7 100.0 100.0 Rural 2.5 3.2 1.3 1.9 Industry 69.1 69.1 37.2 41.2 GeoLogicaL expLoration 1.4 2.3 0.8 1.4 Construction, transportation 5.7 6.7 3.1 4.0 Post and teLecom, commerce, trade 10.8 7.4 5.8 4.4 MateriaL suppLy, housing, public utiLity 27.3 38.3 14.7 22.8 Management, resident service 8.2 7.1 4.4 4.2 Health, sports, social welfare 8.9 4.7 4.8 2.8 CuLture, arts, education 14.6 6.5 7.9 3.9 Science, research, technology 3.5 0.5 1.9 0.3 Finance and insurance 4.5 0.9 2.4 0.5 Party and government, mass organization 26.7 17.7 14.4 10.6 Other industry 2.7 3.5 1.4 2.1 Source: State Statistical Bureau urban househoLd survey team. kets, there will be winners and losers. Thus the gov- fer from poor living conditions and a difficult work ernment must put in place a safety net for the poten- environment, and are vulnerable to emotional distress tially vulnerable population in urban areas. Analysis (see annex 1). points in particular to laid-off and furloughed work- The government needs better information to ers. The disabled also remain vulnerable, while develop programs to assist the urban poor. women appear to suffer disproportionately from Establishing a meaningful urban poverty line would enterprise restructuring. In addition, the growing help, as would systematic monitoring of the unem- migrant population is potentially at risk. While urban ployed and their adjustment experience. It is also time migrants typically are not among the ranks of the for the government to take a comprehensive look at its urban poor, they are deprived of social assistance, suf- system of social protection. Substantial work has How Policies Affect Individual Welfare 51 already gone into analyzing the pension and health 2. Roughly half of the mean squared poverty gap (defined as the care fn cst sEfts uincome needed to bring the poor out of poverty) for the four provinces care finance systems. Efforts should now focus on resuLted from fluctuations in consumption, while about 40 percent of China's system of unemployment compensation, dis- the transient poverty was found among househoLds who are not poor ability and other benefits (including maternity leave), on average (JaLan and RavaLLion 1996b). and labor training and retraining schemes. The gov- 3. Using a current cross-section of consumptions, JaLan and RavaLLion (1996b) find that the fuLL cost of eLiminating chronic poverty ernment should also strengthen job information net- wouLd be three or four times the poverty gap based on mean con- works. Finally, lessons should be emerging from urban sumption over six years. and reemployment programs. Much 4. The poverty Line used to identify the near poor is set at 454 job creation and reemployment programs- Mucn yuan in 1990 prices, equivaLent to $1 a day of income in 1985 pur- could be learned from a systematic evaluation of these chasing power parity doLLars using the Penn WorLd Tables (Summers programs' cost-effectiveness and the conditions for and Heston 1995). 5. For a detailed discussion, see WorLd Bank (1997a). their success or failure. 6. Less than 6 percent of those who had retired between 1991 and 1995 became 'new poor," defined as falling into the bottom two Notes income deciLes from at Least one step above. Among sampled house- hoLds, 27 percent of the "new poor" came from those who were newLy 1. Using the definition in Chen and RavaLLion (1996). unempLoyed, furloughed, or had left the Labor force. 52 Sharing Rising Incomes: Disparities in China Mi;gration and Inequality in China ver the past decade greater employment opportunities and higher living standards have lured China's peasants to the cities in unprecedented numbers. This migration has redistributed income and in some areas appears to have increased inequality, but the exact effects cannot be measured with available data. National urban household surveys include only official urban residents; most migrants who reside in cities are not officially registered. Although migration creates new challenges for China's rural and urban economies, so far its effects have been largely positive. Migration alleviates the pronounced inequality between poor rural people and wealthy urban- ites and helps redistribute rural incomes because migrants send significant portions of their earnings back to their families. Although migration may be increasing inequality among urban residents, national inequality would likely be more severe in the absence of migration. Governments 53 could increase the income distribution benefits of long-term migrants. That number swells to 70 million greater labor mobility by providing poor rural residents when it includes people who work close enough to with more opportunities to migrate. home to return each night and self-employed workers who travel between their home village and outside loca- Evolution of migration and tions (Rozelle and others 1997). Migrants tend to come current trends from rural areas in the interior provinces and go to cities in the richer coastal provinces; there is also substantial Because population policies have discouraged rural res- migration within coastal areas. Emigration rates for idents from moving to cities, about 70 percent of poorer interior provinces (such as Yunnan) are lower. China's population is rural-unusual for a country at The large influx of migrants to the cities has sparked its level of development (China State Statistical Bureau anxiety among urban residents, and officials have scram- 1996). In 1948 China enacted the household registra- bled to enact policies to curb and regulate the flow. These tion system (hukou), designating households as rural or anxieties reflect both capacity concerns (an overflow of urban. This system was iron-clad, and converting from the railway system during the Chinese New Year) and a rural to an urban hukou was nearly impossible. understandable fears (that migrants will increase urban Members of urban households could live in cities and unemployment and crime, crowd urban schools, and small towns, received state-subsidized grain supplies, evade birth control regulations). To try to stem "blind" and could work in government enterprises. These rights migration, recent national policies require migrants to were denied to peasants with rural hukous. obtain permits from the authorities in both the source vil- In 1980 policymakers introduced the household lage and the destination area testifying that they are responsibility system, which allowed households to migrating to a job. Requirements for other permits have determine how to allocate labor between farm and off- proliferated and vary between localities. But while the farm activities. Although rural residents could leave the new policies create hardship for migrants, requiring pay- land, they still could not legally reside in cities. Without ment for a patchwork of permits, they have done little to urban registration, migrants are essentially second-class stem the tide. The authorities recognize some of the ben- citizens, and their stay in the city is subject to the whim efits of migration, and policy documents (including the of the authorities. And because migrants are denied Ninth Five-Year Plan) call for orderly migration to help access to urban services, good jobs, and social status, alleviate poverty. Recent efforts have focused on coordi- they are discouraged from bringing their families. nation between provinces to regulate the flow of migrants Moreover, migrants tend to retain ties to agriculture and mitigate congestion of the transport system. because it provides security, especially valued given the Whether large-scale migration continues will depend lack of a formal old-age security system in rural China. in part on whether the surplus labor force has been So, despite the high income potential of migration, exhausted. Chinese researchers indicate that the surplus these drawbacks limit the duration of migration, and labor force (not including those who have already migrants return frequently to their home villages. migrated) ranges from 130 million to 168 million (Mason Although urban migrants earn nearly three times as 1997a). If these figures are accurate, migration could con- much as rural nonfarm workers, better-educated rural tinue for the next decade given current agricultural and residents prefer local nonfarm employment. population policies and urban growth rates. Survey work In the early 1980s rural incomes grew rapidly, so the has shown that the shadow wage rate for agriculture is difficulties in finding urban employment and the imped- extremely low-well below that for other rural employ- iments of the hukou system outweighed the incentives ment-supporting claims that a large surplus labor force to migrate. But later, as the early gains from the rural still exists (Hare and Zhao 1996). reforms were exhausted, urban reforms boosted urban growth rates, and rising disparities spurred migration. Migrant profile Recent estimates of the current number of migrants range from 30 million to 200 million. Data from a Migration tends to be concentrated by area and appears recent survey suggest that there are around 40 million to vary widely across counties and even villages. Most 54 Sharing Rising Incomes: Disparities in China migrants find their jobs through family and other infor- were typically less advantaged than nonmigrants on mal connections, and these connections are mostly at almost all counts: their pre-migration income levels the village level (China Ministry of Agriculture 1996). were up to 30 percent lower; they had less cultivated Only 15 percent of migrants find jobs through formal land and fewer fixed assets; more of their income channels, such as local labor bureaus and employment came from agriculture, and more from staple crops; offices. Most migrants are young, unmarried, and work and fewer of their household members worked in in blue-collar and service jobs. The average migrant is township and village enterprises (China Ministry of less educated than the general population but more edu- Agriculture 1996b). cated than the rural population. Few migrants come Migration patterns are changing. Migrants now from the ranks of the absolute poor, who lack even the travel farther to find work and stay away for longer few years of schooling and basic Mandarin required for periods, although women tend to migrate shorter dis- most migrant jobs. tances than do men. Recent government policy has tried Young, single workers migrate because job opportu- to ease the pressure on the transport system by prevent- nities are abundant and their migration costs are low. ing migrants from returning home at Spring Festival, a The construction sector absorbs the largest share of custom that prevailed in the past. Shorter migration migrant workers, followed by manufacturing, light cycles are common for migrants working closer to assembly, and services. The predominance of construc- home, who may take off-farm jobs during the agricul- tion jobs is one reason men migrate more often than tural slack season and return home for the harvest or at women. In areas where light assembly jobs dominate, other times when they are needed. Migrants typically however, female workers may outnumber males by as return home after fewer than 200 days, and some much as seven to one. Joint ventures in Guangdong researchers have found evidence that workers migrate Province that offer high-paying, relatively secure jobs for five to seven years, then stop (Rozelle and oth- prefer to hire women. This, and the increasing informa- ers 1997). tion available to women, may account for recent increases in the proportion of female migrants (Rozelle Migration's impact on urban areas and others 1997). In other countries educated people are the most Unlike most countries, China's development has pro- likely to migrate, but in China migrants tend to be nei- ceeded without pronounced urban overcrowding and ther the best nor the worst educated in their home vil- degradation, thanks in part to policies that have lages. In the late 1980s most migrants had only an restricted migration. As a result Chinese citizens con- elementary school education, but by the mid-1990s sider urban areas to be more orderly and free of crime most had completed middle school. Well-educated than rural areas, so any increase in urban crime is workers tend to work in township and village enter- viewed with alarm-often out of proportion to the prises or to cultivate nonstaple crops, both of which threat it presents. Thus urban residents blame migrants may yield even higher incomes than migration (Hare for deteriorating living standards, mounting crime and Zhao 1996). rates, and increasing unemployment. Migrants tend to be poorer than the average rural resident but, as noted, they generally are not from the Costs and benefits ranks of the absolute poor. Data show that in 1994 the highest concentration of emigration from eighteen Certainly, migration has reduced the standard of living provinces in Sichuan came from counties with in cities. The transient population commits more than incomes around the average for rural Sichuan and 30 percent of the crime in Beijing, 70 percent in slightly below the national poverty line. In 1995 a Shanghai, and 80 percent in Guangdong (FBIS 1996b). Ministry of Agriculture study surveyed four counties Migration may contribute indirectly to urban unem- with high migration rates in Anhui and Sichuan ployment because migrants compete for low-wage, provinces. The three that were officially designated low-status jobs, although most urban residents face lit- "poor counties" had the highest migration. Migrants tle risk of being displaced. And because migration Annex 1 Migration and Inequality in China 55 swells the urban population, transport and services are The difference in income between urban and migrant increasingly overcrowded and strained, and since many workers is due mainly to different occupational profiles. migrants escape the tax net, they do not contribute Migrant workers tend to fill low-wage jobs. More than toward maintaining municipal infrastructure. 90 percent of the surveyed workers from Sichuan and Nevertheless, cities with large migrant populations Anhui are employed in nonprofessional positions. In tend to thrive. Migrants contribute to a city's vitality by Shanghai more than 60 percent of migrant workers are providing a low-wage workforce. And by increasing the employed in factories or in services in nonprofessional variety of products available to local residents, migrant- positions. Moreover, within a given occupation migrant owned businesses stimulate the urban economy (Wu workers tend to be paid less than permanent urban and Li 1996). For example, in 1990 Dongguan, in workers. For example, a migrant textile worker in Guangdong Province, contained only 50 enterprises Shanghai makes an average of 500 yuan a month, while and 5,000 residents. It is now home to 20,000 foreign- an officially registered urban textile worker in Shanghai invested enterprises and has a population of 500,000, makes 600 yuan a month (China Ministry of of which more than 90 percent are migrants. Agriculture 1996a). Wage gaps between migrant and Dongguan's economy has grown by 20 percent a year resident workers would be even wider except that 10 since 1990, well above even Guangdong's high growth percent of Shanghai's migrant workers have technical rates. and white-collar managerial positions that pay more than 900 yuan a month. Better off but far from equal State enterprises employ 65 percent of resident urban workers, and 85 percent of their remuneration com- Migrant workers earn salaries that are many times prises employment benefits such as housing, medical greater than farming incomes in their home villages, care, education and daycare for children, maternity and migration reduces rural-urban income disparities benefits, vacation leave, pensions, food subsidies, and through remittances. But resident workers earn more compensation for job-related injuries. Few migrant money than migrants and have better employment ben- workers get jobs in state enterprises. For example, only efits. Furthermore, most migrants' access to services 14 percent of migrant workers from Anhui and Sichuan does not improve and may even worsen when they relo- work for the state. As a result disparities and inequality cate to the city, so the effect of migration on equality is between migrants and residents are even more pro- difficult to calculate. nounced than the data on wages suggest. Migrant workers' consumption and savings are Employee benefits for migrants are both meager and higher than those of their rural counterparts. But often of low quality. Employer-provided housing for migrant workers earn, consume, and save less than single migrant workers usually consists of dormitories urban resident workers. In 1995 the average wage of or makeshift arrangements in the workplace. migrant workers in Shanghai was 704 yuan a month, Restaurant workers may sleep in the back room, con- about four times the average rural income in source struction workers live in tent structures with no ameni- provinces that supply the Shanghai market. Migrant ties, and small traders often congregate in shacks and workers consume a smaller share of their earnings (51 shanty towns on the outskirts of major cities. percent for migrants compared with 64 percent for res- Health and education benefits for migrants are also idents) and save a larger share than their Shanghai skeletal, and migrants are likely to incur high health counterparts. But in absolute terms, migrants' con- expenses for basic care because, while some companies sumption and savings are lower. Migrant workers from pay for treatment of job-related injuries, the compensa- Anhui and Sichuan provinces earn 1.64 yuan and 1.72 tion for migrants is far below that for regular workers. yuan an hour, compared with the national average wage Employers pay for neither routine care nor serious ill- of 2.23 yuan an hour (China Ministry of Agriculture nesses-a serious problem since migrants are much 1996a and 1996b). Despite earning less than their more likely to live in crowded, unsanitary conditions urban counterparts, migrants generally do not fall into that pose higher risks for communicable disease such as the ranks of the urban pOOL tuberculosis. 56 Sharing Rising Incomes: Disparities in China Children of migrants are not permitted to enroll in Migration's impact on rural areas public schools or are forced to pay much higher fees than urban residents. National policy mandates that The benefits to rural households from migration are localities provide facilities for enrollment of all school- dramatic, particularly for poor households. All surveys age children. But this regulation is often interpreted of migrants have reported high levels of remittances. as applying only to permanent residents. To enroll, Migrants typically send home 20-50 percent of their migrant families often must pay fees that are up to income. A migrant from Sichuan earning 5,000 yuan a ten times higher than those for children of urban year typically sends home almost 2,000 yuan, more residents. than twice the 1995 rural per capita income in Sichuan. To address the lack of access to services, migrants in In Sichuan and Anhui migrant incomes account for an some cities have grouped together into makeshift vil- average 20 percent of household income and 50 percent lages, formed according to province or county of origin. of household cash income. Households in poor regions Villages provide migrants with a wide range of services, have a larger share of migrant income in total income from shops to hospitals and schools. In Shenzhen than do households in wealthy regions. 10,000 migrant children attend hut schools, minimal Migration clearly reduces income disparities and facilities that fall below mandated national norms. At inequality between rural and urban households. Not one point local authorities closed the hut schools only does it provide more current and future income for because they failed inspection tests. rural households, it also reduces disparities in access to Both income disparities and unequal access to ser- services such as health and education by providing vices are more pronounced when families migrate. resources to pay for such expenditures. In Anhui and Single migrants can make do without full access to Sichuan remittances are used to construct homes, meet health care, education, and housing, but for families daily living expenses, buy agricultural inputs such as the impact can be devastating. And because migrant fertilizer, and accrue savings. About 90 percent of the families tend to be large, income disparities between villagers surveyed who had built new homes in 1994 urban residents and migrants increase with family were migrant families. Data on migration of the migration (FBIS 1996b). Family migration is low in absolute poor show that these families spend most China-Ministry of Agriculture data show that only remitted funds on productive inputs, daily necessities, 6.6 percent of migrants bring families and less than 1 livestock, education, and housing. In the poorest house- percent succeed in changing to an urban hukou. But holds migration income brings families out of a grain even a small percentage can have a large effect on deficit. urban areas. For example, in Shanghai it is estimated By raising the incomes of the rural poor, migration is that 100,000 of the city's 2.6 million migrants have reducing income disparities between the richest and moved their families into the city, increasing the popu- poorest rural areas. Within these areas, however, migra- lation by more than 320,000. Municipal officials say tion appears to increase income disparities, especially in that nearly all these families are poor (South China poor regions. More people migrate out of poor areas, Morning Post, 5 May 1997). but the absolute poor tend to stay behind (China Of course, in many ways the services available to Ministry of Agriculture 1996b). migrants are no worse than what is available in rural When families migrate, the beneficial effect of migra- areas, particularly for migrants from very poor com- tion on urban-rural income disparities is diluted. munities. There is no rural pension scheme in China. Migrants send back much less in remittances to family Most rural Chinese now pay directly for health services, members remaining in rural areas once they are joined and catastrophic illnesses can easily impoverish even by their immediate family. middle-income rural residents. And rich migrants can The effect migration has on rural communities and afford more sophisticated care than is available in rural the rural economy (beyond the household level) is areas. Migrants face much higher education costs than unclear. The migration of young, well-educated males in their home village, but if they can afford them the could easily cause agricultural productivity and grain quality is higher in cities. production to suffer. But many surveys have found a Annex 1 Migration and Inequality in China 57 positive correlation between grain production (in both Migration has had positive effects on both rural absolute and per capita terms) and migration. Of and urban economies. Evidence does not indicate that course, as surplus labor leaves rural areas, productivity migration has a negative effect on agricultural pro- would be expected to increase. But it also seems that ductivity, and it is stimulating the rural economy in agricultural experience contributes more to productiv- many ways. While migration's effect on urban infra- ity than does education (after completion of three years structure, congestion, crime, and other problems is of elementary school). With higher migration rates for clearly negative, in many ways these negative effects men, women's agricultural work has tended to increase, are outweighed by the positive contributions albeit with large regional variations. The effect of this migrants make to urban economies. phenomenon on productivity has not been widely stud- Certainly, Chinese policymakers could take steps ied. Many observers have noted that men who are to maximize the benefits of migration while helping needed for farm work tend to migrate short distances groups and localities adjust to the negative effects. and for jobs that allow them to return in time for the The poverty alleviation impact of migration has been harvest. strong, but modifying current policies could heighten Migration appears to bring other benefits to the rural this impact. For example, it appears that information economy, including increased diversification and networks are a strong determinant of migration and growth in off-farm employment and self-employment. that they often miss the poorest areas. The Chinese Migrant families tend to engage in more nonagricul- government could increase opportunities for a tural activities, and counties with a long tradition of broader range of citizens to migrate by strengthening migration appear to have more nonagricultural indus- these networks. County labor bureaus are a natural tries. Village leaders say that rising migration has stim- source of information about migration opportunities, ulated the expansion of the self-employed sector, but the extent to which they supply this information because remittances increase the demand for services. varies both across and within provinces. But within agriculture, nonmigrant households invest Strengthening information networks would more, earn more, and engage in a more diverse range of increase migration opportunities for most of China's activities. Whether migrants return to rural areas will, near poor. But the absolute poor face greater obstacles of course, determine the long-term effect of migration than information. Lack of a basic education and a on the rural economy. While more than 80 percent of weak command of Mandarin (for members of minor- surveyed migrants say that they plan to return, data on ity groups) make it more difficult for this group to returnees are sparse (China Ministry of Agriculture migrate and make them more vulnerable to abuse. 1996b; Rozelle and others 1997). Nevertheless, migration is a powerful means for help- ing the absolute poor. And because this group tends to Conclusion live in China's most remote, resource-poor areas, other means of improving their livelihood are often Migration has reduced rural-urban income disparities unavailable. Experiments by the government and the at both the individual and household levels. World Bank to help the poorest migrate safely are Migration also has lowered inequality (access to ser- promising and should be replicated. vices), except in cases where families migrate. The Carrying through with urban reforms would both effect on disparities within rural areas is less clear-cut. lower the cost of migration and mitigate some of the Migration appears to reduce income disparities negative impacts. Reforming housing, pension, and within rural areas and lower inequality between rich health finance so that migrants and nonmigrants pay and poor regions. But within regions, and particularly the same rates for these services would reduce inequal- within poor regions, migration may increase income ity. Housing reforms would help prevent migrants from disparities and inequality. Migration has increased forming slum communities. Increasing access to health income disparities and inequality within urban areas, care would reduce the incidence of communicable dis- and the effect is much more pronounced when fami- ease. Of course, these reforms would increase the ten- lies migrate. dency for families to migrate. Consequently, the 58 Sharing Rising Incomes: Disparities in China education system would need to be funded to accom- migrants to apply for "blue" hukous (which give modate growing numbers of students. them temporary right of residence), should be accel- The hukou system has dampened migration, par- erated. Streamlining the permit process by allowing ticularly family migration. The impact on individual migrants to receive all necessary permits from one migration is much less severe. Experiments with mak- source would reduce the costs and hardships migrants ing the system more flexible, such as allowing bear. Annex 1 Migration and Inequality in China 59 I~~~~~~~~~~~~~~~~~~~~~~~~~~~I Survey of Literature on Inequality, Income Distribution, and M4igration in China Source Summary Abstract Khan, A.R., and Describes rural, * Widens definition of income to others. 1993. urban, and include all disposable income (for "Household national income example, payments in kind and Income and Its inequalities in agricultural output for self- Distribution in 1988 and consumption), making true per China." In Keith identifies capita income in rural areas 39 per- Griffin and Zhao contributing cent higher and in urban areas 55 Renwei, eds., The factors. percent higher than State Statistical Distribution of Bureau estimates. This adjustment Income in China. implies that the urban bias of non- New York: cash income raises rural-urban St. Martin's Press. inequality and that household and national income are significantly underestimated. * Gini coefficients: rural inequality (Gini coefficient of 0.34) is signifi- cantly higher than urban inequality (0.23); total inequality (0.38) is -/ -;higher than both rural and urban inequality because of large urban- rural inequality. * National inequality: the most important sources of income inequal- ity are urban wages and in-kind sub- sidies to urban workers (especially 61 a~~~~ Af: Source Summary Abstract housing subsidies), which are distributed relatively equally among the recipients but overall accrue to relatively rich urban workers, thus contributing 36 percent and 32 percent to national income inequality, respectively. * Rural income inequality: the most important factor explaining income inequality is the difference in income from production activities, which accounts for almost 75 percent of income and explains more than 60 percent of rural income inequality. The difference in wage income is also a significant contributor to rural inequality. * Urban income inequality: the two most important factors, wage inequality and differences in housing subsidies, con- tribute 34 percent and 24 percent, respectively, to urban inequality. Urban bias and regressive taxes and subsidies reduce rural incomes by 4 percent and raise urban income by 39 percent. If the benefits of subsidies and burden of taxes were neutral, rural incomes would be 23.5 percent higher and urban incomes would be 30.9 percent lower, and the rural-urban income ratio would increase from 41 percent to 74 percent. One weakness of this study is its interpretation of the con- tributing factors as "disequalizing" and "equalizing," rather than defining the effect of the factors depending on their over- all contribution to inequality. Renwei, Zhao. "Three China's reforms have resulted in a dualistic system that has three Features of the main characteristics: Distribution of Income * The coexistence of a regulated state sector with relatively low during the Transition levels of income inequality (Gini coefficient of 0.23) and a to Reform." In Keith market-oriented sector characterized by high levels of income Griffin and Zhao inequality (Gini of 0.49). Renwei, eds., The * Distinct time dynamics: during 1978-84 inequality declined as Distribution of the rural-urban income ratio rose from 42 percent to 54 per- Income in China. cent, mainly because rural markets were opened, the commune New York: system was dissolved, and rural (agricultural) terms of trade St. Martin's Press. improved. During 1984-90 rural-urban income inequality increased because of declining productivity growth in agricul- ture, price and enterprise reforms in urban areas, and a decline in the rural terms of trade. * Urban nonwage payments rose rapidly after reforms were introduced. They now make up 30 percent of urban income and have a strongly disequalizing effect. * Recommends reducing inequality by deepening reforms and reducing nonwage sources of income to improve efficiency and incentives. 62 Sharing Rising Incomes: Disparities in China Source Summary Abstract Khan, A. R. Describes rural income * 74 percent of rural income comes from farm and nonfarm pro- "The Determinants of inequalities and duction activities; only 9 percent comes from wages and Household Income in identifies contributing salaries. Rural China." In Keith factors. * Households that are located in privileged provinces have a Griffin and Zhao higher stock of human capital (in terms of education), produce Renwei, eds., The for the market rather than for self-consumption, are Distribution of focused on nonfarm activities, and receive more income from Income in China. production activities. New York: * Variation in income among provinces is the most important St. Martin's Press. factor explaining interregional differences. * An important source of rural income inequality results from wage employment, which is highly unequal (62 percent goes to the top 10 percent and 10 percent goes to the bottom 20 per- cent). Thus most rural income accrues to a small, privileged minority that lives in privileged regions, often close to urban centers, is likely to be a member of the Communist Party, and does not have a higher stock of human capital. McKinley, Terry. 1996 * Wealth (Gini coefficient of 0.31) is distributed more equally The Distribution of than income (Gini of 0.34) in rural China. Wealth in Rural China. * Land accounts for 59 percent of rural wealth and housing, New York: M.E. Sharpe. for 31 percent. * Land is distributed relatively equally (Gini coefficient of 0.31). Housing (Gini of 0.49) and other productive assets, such as financial assets, are not. - These characteristics are highly atypical for a developing coun- try: in China the main source of rural income inequality is wage income rather than the return to assets such as land. Riskin, Carl. Analyzes rural poverty Using official Chinese conception of poverty plus adjustments for "Income Distribution in China. regional differences in price levels, finds that: and Poverty in Rural * 105 million (12.7 percent) Chinese were below poverty line of China." In Keith 333 yuan in 1988. Griffin and Zhao * Most poor people (64.5 percent) are not located in designated Renwei, eds., The poverty regions. Distribution of * Econometric analysis shows that the most powerful policy Income in China. measures to address poverty in China are an increase in rural New York: wage employment, an improvement of irrigation and drainage St. Martin's Press. facilities in disadvantaged rural areas, and investment in human capital. Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 63 Source Summary Abstract Knight, John and Describes inequalities * In 1988 rural industries (township, village, and private enter- Song Lina. arising from rural wage prises) employed 96 million people, or 24 percent of the rural "Workers in China's employment. labor force, and between 1978 and 1988 absorbed 62 percent Rural Industries." of new entrants into the labor force. In Keith * Wage employment strongly exacerbates rural income inequal- Griffin and Zhao ities because it benefits mainly the rich: richest 30 percent of Renwei, eds., The rural population receives 84 percent of wage income. Distribution of * Most rural enterprises are concentrated in richer and suburban Income in China. rural areas. New York: * Wage employment biased in favor of the educated, men, and St. Martin's Press. members of the Communist Party. Knight, John and Describes inequalities * Urban wage distribution is highly equitable (Gini coefficient of Song Lina. arising from urban 0.20), mainly because of administrative decisions rather than "Why Urban Wages wage employment. market forces. Differ in China." * Main disequalizing factor is noncash payments, such as hous- In Keith ing and other services provided by enterprises and authorities, Griffin and Zhao although urban income inequality is relatively equal for a Renwei, eds., The developing country and more equal than rural income Distribution of distribution. Income in China. * Returns to education are low, even in the private sector. New York: Discrimination exists on basis of sex and Communist party St. Martin's Press. membership. * One striking factor of labor market is its high degree of job security, with job tenure basically guaranteed for life. Knight, John and Analyzes distribution * Broad distribution and relatively equitable access to education, Li Shi. of education among with a focus on primary and secondary education. "The Determinants Chinese population. * Limited supply of and access to higher education. of Educational * Women have 2.3 years less education than men. Attainment." In Keith * Large urban-rural gap in educational attainment: urban peo- Griffin and Zhao ple receive an average of 9.6 years of education-about 4.1 Renwei, eds., The years more than rural people. Distribution of * The strong link between provincial income and education lev- Income in China. els in rural areas exacerbates education inequalities because New York: rural areas generally have lower income levels. St. Martin's Press. Hussain, Athar, * Income inequality in urban areas (Gini coefficients in Peter Lanjouw, and 0.19-0.22 range) is lower than in rural provinces (Gini of Nicholas Stern. 1994. 0.19-0.28). "Income Inequalities * Income inequalities at national level mainly result from in China: Evidence intraprovincial inequalities. from Household * Rural income: although farming income is the largest compo- Survey Data." nent of total income, nonfarming income is the largest World Development contributor to inequality. 22(12): 1947-57. * Urban income: wage income accounts for more than half of total income, but bonuses and irregular income (second jobs, 64 Sharing Rising Incomes: Disparities in China Source Summary Abstract commercial activities, hardship allowances) explain most urban inequality. * Authors conclude that with reforms and the move to market those components of income will rise most that contribute most to income inequalities-nonfarming activities and irreg- ular income. There are, however, no empirical facts for this claim. Study excludes floating population of migrants and uses a nar- row definition of income that ignores noncash income. Study argues that excluding migrants does not necessarily cause a downward bias because, although migrants have low-paid jobs, their families are mostly in rural areas, so their per capita income is not necessarily low. However, there is no empirical evidence for this claim. Howes, Stephen, and Analyzes changes in and * Rural output inequality rose during 1985-9 1; the main source Athar Hussain. 1994. components of regional was the rapid growth of the nonagricultural output of town- "Regional Growth output inequalities. ship and village enterprises. and Inequality in Uses State Statistical * Gini coefficient for total output per capita rose from 0.244 in Rural China." Bureau county-level 1985 to 0.335 in 1991 as a result of three main factors: London School output data for most 1. Net output increased by 6.4 percent a year, or 45 percent of Economics. of the 2,364 counties during 1985-91; nonagricultural output grew by 13 percent for 1985-91; broadest a year compared with agricultural output growth of 1.3 definition of rural is percent a year. used, classifying 80 2. Gini coefficient for nonagricultural output (0.56 in 1991) percent of the popula- was far higher than for agricultural output (0.23 in 1991). tion as rural; uses 3. The low rise in the Gini coefficient for nonagricultural out- constant 1980 con- put implies that township and village enterprise growth is not sumer price index data. focused entirely on rich, eastern counties. The resulting contributions to the increase in overall output inequality are 11 percent for the increase in the Gini coefficient for nonagricultural output, 33 percent for the Gini coefficient for agricultural output, and 55 percent for the increase in the share of nonagricultural output. * Study disagrees with World Bank (1992) finding that poverty reduction stagnated or even reversed during late 1980s, and argues that output for almost all counties (except the poorest 5 percent) rose during 1985-90 and thus that poverty has con- tinued to decline. It should be noted that output data and household data (such as those used in World Bank 1992) draw very different pictures. Output data estimates are higher due to the inclusion of retained rural output (for example, for enterprise consumption and investment, which does not go to households as income), the broader definition of rural areas (which includes towns where income and output per capita is generally higher), and Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 65 Source Summary Abstract measurement errors in data. The central question is how much retained rural output accrues to households in the form of, say, housing and social security benefits provided by workers' enterprises (noncash income) and how much is invested or consumed by enterprises without immediately benefiting workers. The actual figure is most likely between the two data estimates. World Bank. 1995. * Disparities in output and especially consumption per capita "China: Regional between coastal and interior regions have increased since 1978 Disparities." and especially since 1985. Report 14496-CHA. * Rural inequalities are larger than urban inequalities. * Disparities mainly result from competitive advantages of coastal areas stemming from advantages in transport, commu- nications, and trade, which were exacerbated by market- oriented reforms since 1978, by policies that encourage eco- nomic activities in coastal regions (international commercial policies, fiscal and enterprise reforms, pilot programs) and attempt to curb migration flows, and by the lack of fiscal redistribution. e Regional social indicators (mortality rates, educational attain- ment, illiteracy) are broadly correlated with regional dispari- ties in output and per capita income and consumption. - Based on findings for Henan and Sichuan, intraregional dis- parities are greater than interregional disparities. * Official data underestimate the size of the floating population living in richer coastal provinces, causing an overestimate of regional disparities. The floating population is likely to be around 10 percent of the coastal population; poverty is likely to be the most important force driving migration. * Study stresses the need to anticipate and manage migration flows as well as the need to reduce incentives for migration and its negative side effects by eliminating the urban bias of policies. * Study provides interesting discussion of data quality and related difficulties with analyzing disparities in China (appendix 2). Jian, Tianlun, Analyzes convergence * Study finds evidence for weak convergence for 1952-65, Jeffrey Sachs, and and divergence trends in strong divergence for 1965-78, convergence for 1978-90, and Andrew Warner. 1996. GDP per capita among divergence since 1990. "Trends in Regional provinces and explains * The two convergence measures are cT-convergence (standard Inequality in China." trends. Uses official deviation across regions of log real GDP per capita) and j3- NBER Working Paper Chinese data for 1952- convergence (growth in per capita GDP relative to initial per 5412. National Bureau 93 for twenty-eight of capita GDP). of Economic Research, thirty provinces using * Initial convergence (1978-85) occurred mainly because of Cambridge, Mass. provincial price rapid growth in rural areas resulting form reforms. Later con- deflators. vergence (1985-90) occurred mainly because of continued 66 Sharing Rising Incomes: Disparities in China Source Summary Abstract growth in rural areas, especially areas near open coastal cities. Divergence since 1990 mainly due to rapid growth of coastal, urban areas, which grew by an average 7.4 percent a year faster than others. * Important finding that overall convergence during 1978-90 was mainly due to convergence among coastal provinces, while variance between coastal and interior regions remained constant in 1978-90 and then widened dramatically after 1990. * Study summarizes migration policies since 1950s and broad market reforms. * Predicts continued divergence; study points out that both labor and capital are flowing into richer, urban, coastal areas rather than poorer, rural, interior provinces. One of the study's weaknesses is that it excludes the floating pop- ulation of 100-150 million people due to lack of data. Thus esti- mates are likely to be biased upward since actual GDP per capita is likely to be higher in rural areas and lower in urban areas (espe- cially coastal provinces). Yong, H.E., and Criticizes official income Argues that income inequality derives not only from market Jean-Christophe Simon. measures that ignore forces but also from corruption, rent seeking, distortions cre- 1995. "La distribution other sources of income, ated through the dual price system and its biased tax/subsidy des revenus dans la such as corruption, rent system (for example, social benefits and unequal treatment in transition economique seeking, and so on. the privatization of housing), and so on. de la Chine." * Discusses shortcomings of official data that exclude these sources of income inequalities and thus are likely to underesti- mate true disparities. * Mentions individual cases of government distortions and corruption. Ying, Yvonne. 1995. Uses State Statistical * Makes similar points to above studies: income inequality and "Income, Poverty and Bureau data: China poverty fell between 1978 and 1984 and then stagnated or Inequality in China Statistical Yearbook rose. during Transition." and Survey of Income * Summarizes agricultural policies since 1978 (household Research Paper 10. and Expenditure of responsibility system and price policies). World Bank, Urban Households in * Analyzes rural terms of trade: rise in agricultural prices during Washington, D.C. China. 1978-84 and then stagnation, mainly due to policy reforms; strong increase in fertilizer and pesticide prices since the late 1980s; strong rise in nonfarming output and income since the mid-1980s. * Concludes that urban inequality has stagnated since 1985: paper includes quantitative analysis which shows that the elim- ination or reduction of food subsidies caused urban inequalities to rise, while full employment policies and state enterprises' basic wage equalization eased income disparities somewhat. Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 67 Source Summary Abstract * Analyzing rural terms of trade has important implications for poverty analysis: it is not gross income that is most relevant, but disposable income (that is, prices) that are important- especially production costs (such as pesticide and fertilizer costs). Deininger, Klaus, and Using more comprehensive data, the authors yield interesting Lyn Squire. 1996. findings: "New Ways of Looking * Initial inequality of assets (measured by land distribution) is at Old Issues: Inequality more significant than income inequality in affecting subse- and Growth." quent growth. World Bank, Policy * Kuznets curve hypothesis does not hold for many countries: Research Department, the most important factors affecting changes in inequality are Washington, D.C. policy-related and do not necessarily depend on a country's degree of development. Guang Hua Wan. 1995. Describes rural migra- * In 1986, 37 percent of sample population were migrants. Of "Peasant Flood in tion and migrant charac- these, about 60 percent were intramigrants (moving within China: Internal teristics for 1986. Uses townships) and 40 percent were emigrants. Migration and Its 1986 village survey for * Only 4 percent of emigrants moved to big cities (that is, most Policy Determinants." 230 villages in eleven emigrants moved to other rural areas). Third World Quarterly regions (undertaken by * Most migrants shifted into construction (23 percent) and 16 (2). the Chinese Academy industrial (34 percent) activities; less than 3 percent moved of Social Sciences). into agriculture. * Overall, migrants were not more educated: education deterred emigration but encouraged in-migration. The reason, accord- ing to the author, is that there is significant demand for less- skilled workers in rural towns and cities, while there is a sig- nificant demand for skilled and educated people in rural areas because of reforms. * Migration to urban areas is more likely to be seasonal, while migration to rural areas tends to be permanent. * Explanations: Urban reforms lagged behind rural reforms until mid-1980s, thus reducing the rural-urban gap in terms of income. Study argues that the dismantling of the commune system and the rapid growth of township, family, and cooper- ative enterprises explain a large share of intramigration flows. Study claims that the low share of rural-urban migration, its seasonal character, and the low female share of migrants is most likely explained by the lack or poor quality of social ser- vices for migrants in nonrural areas. * Policy recommendations: Government should provide migrants with social services in order to ease problems related to short-term migration (especially concerning infrastructure). It also should encourage urban-rural migration and lessen potential future pressure for rural-urban migration, and thus reduce the rural-urban gap, by eliminating privileges to urban 68 Sharing Rising Incomes: Disparities in China Source Summary Abstract residents (housing, education, health, and so on); reducing land fragmentation, which impedes agricultural productivity growth; and promoting rural urbanization to create jobs and reduce rural surplus labor. The study is for 1986; thus the dynamic of migration may have changed dramatically since then because the rural-urban gap has widened significantly and reforms in rural areas have slowed down. The study's finding of a negative relation between educa- tion and migration is questionable, and the finding that there is a flow of educated people from urban to rural areas is surprising. The survey's small sample may mean that villages in the sample are not representative, and there are a number of potential sources of measurement errors (for example, many permanent emigrants may not be included in study). Li Debin. 1994. Describe characteristics * Floating population defined as mainly legal migrants-that is, "The Characteristics of and size of floating those with permits or those who commute on a daily basis. and Reasons for the population using official This definition excludes/ignores those who migrate illegally. Floating Population in State Statistical Bureau * In 1985 floating population was less than 10 million; in 1989 Contemporary China." data for 1980-93. it was 60-80 million. Social Sciences in China * Most members of the floating population are farmers or agri- (winter): 65-72. cultural workers who leave rural areas for urban areas to find nonagricultural jobs. Morf, Urs. 1994. * Causes of growth in floating population: increasing land frag- "The Threat of Mass mentation, growing population, and decline of cultivable land Migration in China." has created large surplus labor (about 200 million people in Swiss Review of World late 1980s); rapid growth of township and village enterprises Affairs (April). and other private companies offer economic opportunities for workers; rapid growth of cities and attraction of cities for rural workers in terms of employment and living conditions; and policy biases favoring cities and special economic zones. * One of the studies argues that the slowdown in agricultural productivity growth can be partly explained by the migration flow of the most capable persons (that is, young men) from agricultural to nonagricultural jobs, leaving cultivation of the land to parents and other family members. Sahota, Gian S. 1968. Determines migrant * Develops a simple (and somewhat incomplete) model that "An Economic Analysis characteristics and iden- defines migration as a function of average incomes within of Internal Migration tifies migration flows regions and education levels, population densities, geographic in Brazil." Journal of among regions; uses distances, and income dispersions across regions. Political Economy household survey data * Provides interesting discussion of methodological issues; uses 218-45. (population census) simultaneous equation model. for 1960. * Basic findings are that migration is larger when education is higher in the destination area and lower in the origin area, although the effects are not large; that the earnings differential between origin and destination is the most relevant variable; Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 69 Source Summary Abstract that younger people are more sensitive to earnings differentials and thus are more likely to migrate; that urbanization and industrialization in the destination area are significant "pull" factors; that population density at destination was highly sig- nificant; and that income inequality was not important. Weaknesses: data refer only to a single year, people are consid- ered migrants if they were born in a region other than their cur- rent location (even if they migrated many years ago and their cur- rent characteristics were acquired at that destination), and income data are highly aggregated. Todaro, Michael P. * Excellent book on migration; compares approaches to migra- 1976. Internal tion (chapter 3), analyzes econometric approaches (chapter 4), Migration in and summarizes quantitative studies (chapter 5). Developing Countries. * Chapter 3 outlines and makes important additions to the Geneva: International Harris-Todaro model. Labour Organization. Russel, Sharon Stanton. Reviews determinants * Summarizes determinants and effects of remittances (especially 1986. "Remittances and effects of remit- tables 1 and 2 and figure 1). from International tances from interna- * Volume of remittances is large for many countries, totaled Migration: A Review in tional migration. more than $23 billion in early 1980s. Perspective." World * Shows that most studies have found that remittances are used Development 14(6): mainly for consumption and little for investment or saving. 677-96. This pattern need not be unproductive, however, if remittances raise labor productivity. * Cites other studies that found equalizing effect of remittances and income distribution (in Mexico and Pakistan, for example). Stark, Oded, J. Edward Uses alternative Gini * Finds that remittances from international migration to the Taylor, and Shlomo indexes to show that the United States reduce inequality. The effect of remittances Yitzhaki. 1986. effect remittances have from internal migration on inequality is ambiguous. "Migration, on inequality crucially * Analyzes the effect of using different weights in Gini index on Remittances and depends on weight given inequality measure: stronger weight for poor households Inequality: A Sensitivity in index to income of makes the effect of international remittances on inequality sig- Analysis Using the different groups. Uses nificantly less favorable. Extended Gini Index." village-level data for * Points out that low migration among the poor is mainly due to Discussion Paper 23. two Mexican villages lack of resources to afford the journey. Harvard University near the U.S.-Mexican Migration and border. Development Program, Cambidge, Mass. 70 Sharing Rising Incomes: Disparities in China Source Summary Abstract Lipton, Michael. 1980. Provides an overview of * Provides broad but sometimes confusing and contradictory "Migration from Rural the conceptual links review of conceptual links and empirical findings of migration Areas of Poor Countries: between migration, effects. The Impact on Rural rural productivity, and * Argues that emigration's effect on productivity can be ambigu- Productivity and Income income inequality in ous and depends on the response of the rural population to Distribution." rural areas. out-migration and the inflow of remittances. World Development * Argues that emigration has a disequalizing effect-that is, it 8: 1-24. increases intra- and interrural inequalities, as well as rural- urban inequalities, for three reasons: 1. Migrant characteristics: most are young, male, and from poor or well-off households. Better-off, educated migrants receive higher payoffs from migration due to superior infor- mation, transferable skills, better networks, and better ability to pay for the initial costs of migration. Less-skilled households often lose productive family members without necessarily receiving significant returns, resulting in higher intrarural inequality. Villages near cities and rapidly growing areas ben- efit the most from migration, and migration from these areas is more likely and more profitable, resulting in higher inter- rural disparities. 2. Remittances: study argues that remittances mainly accrue to better-off families because they have a significant number of migrants with superior payoffs; that remittances are mainly used for purposes that do not benefit the poor; and that there is little evidence that remittances have a "trickle-down" effect. 3. Return migration: better-off people who have made accom- plishments during emigration or have acquired skills that are useful in rural areas are the most likely to return; thus return migration tends to worsen both intra- and interrural disparities. Adams, Richard H. Analyze effect remit- * Studies compare predicted household income without migra- 1992. "The Effects of tances from internal and tion with real household income with remittances from migra- Migration and international migration tion. The studies find that having an internal migrant within Remittances on have on rural income the household raises predicted household income by $6 a year Inequality in Rural inequality. while having an international migrant raises it by $25 a year Pakistan." The Pakistan (data are from Pakistan). Development Review * Remittances have a somewhat disequalizing effect on income 31 (winter): 1189-1206. inequality in four rural regions in Pakistan. * Reasons for neutral/disequalizing effects: migrants are mostly from rich or poor families, and volume of remittances is larger for richer households. Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 71 Source Summary Abstract Adams, Richard H. Data sets focus on a small and not representative sample of rural 1989. "Worker areas, studies ignore second- and third-order effects of remit- Remittances and tances, and other studies find a more disequalizing effect of Inequality in Rural remittances in Pakistan because they use different data and a bet- Egypt." Economic ter methodology. Development and Cultural Change 38: 45-71. Mohtadi, Hamid. 1990. Analyzes contribution * Concludes that rural push factors were the main cause of heavy "Rural Inequality and of urban pull and rural migration flows; specifically, the land reform of the period, Rural-Push versus push factors to rural- which generated large inequalities by transforming a homoge- Urban-Pull Migration: urban migration neous society into two groups of landowners and landless The Case of Iran, between 1956 and 1976. wage laborers. 1956-76." World * Confirms Lipton's (1980; see above) hypothesis that migration Development 18(6): of the poor is mainly caused by rural push factors (either insti- 837-44. tutional factors, such as land distribution, or Malthusian fac- tors), whereas rural-urban migration of richer, land-owning family members is mainly explained by urban pull factors (such as employment opportunities and higher wages and returns to education and skills in cities; an important pull fac- tor was the oil boom of the late 1960s and the 1970s in Iran). One weakness of this study is that it uses a narrow definition of pull and push factors-employment and wage levels in origin and destination locations. Mohtadi, Hamid. 1986. Analyzes effect rural- * Urban inequality increased in areas where a majority of "Rural Stratification, urban migration had migrants came from landless groups. Urban inequality Rural to Urban on urban inequality in decreased in areas where most migrants belonged to land- Migration, and Urban Iran between 1956 and owning groups and families. Inequality: Evidence 1976. * The main explanation for this finding is that the land-owning from Iran." World class has better education, kinship, and other essential Development 14(6): resources (such as savings) to acquire better-paid jobs, usually 713-25. in the formal sector, while landless groups usually had more trouble finding jobs and generally started off with informal sec- tor jobs. One weakness of this study is that it measures inequality not as income inequality but uses the distribution of urban housing as a proxy for inequality. 72 Sharing Rising Incomes: Disparities in China Source Summary Abstract Goldstein, Sidney, and Review studies of inter- * Review population policies and migration policies since 1949, Alice Goldstein. 1990. nal migration in China emphasizing official policies as the driving force behind popu- "China." In Charles B. between 1949 and early lation movements. Nam and others, eds., 1980s. * Compare surveys and studies on migration in China prior to International Handbook 1980. Most of these studies are based on official Chinese data, on Internal Migration. which strongly underestimate the true number of migrants. For example, official urban surveys estimate that there were just 10 Goldstein, Sidney, and million migrants in 1982; this number ignores the many tem- Alice Goldstein. 1985. porary migrants who do not show up in official studies. "Population Mobility * Describe administrative procedures and enforcement difficul- in the People's Republic ties of migration. of China." Paper 95. East-West Population Institute, Honolulu. Kam Wing Chan. 1994. Reviews the literature on * Compares empirical studies and finds major problems con- "Urbanization and migration and urbaniz- cerning the definition of "urban": estimates of urban popula- Rural-Urban Migration ation in China prior to tion for 1990 vary between 18.5 percent and 52.9 percent. in China since 1982: 1992. * Urban in-migration accounted for about three-quarters of A New Baseline." urban population growth in 1980s. In-migration peaked in Modern China 20(3): 1987-88, then declined, then increased again in 1991-92. 243-81. * About 65 percent of floating population made up of temporary migrants. * Another reason for rapid increase in size of urban population is reclassification of areas-that is, many regions were rede- fined as urban, increasing the relative and absolute size of the urban population. Li, Wan Lang. 1992. * Argues that migration flow in 1980s was much smaller than in "Migration, 1950s and 1960s. Urbanization and * Argues that the main reasons for migration in the 1980s were Regional Development: family-related rather than job-related. Toward a State Theory One weakness of the study is that its argument is based on offi- of Urban Growth in Mainland China." cial data, which exclude many migrants (especially temporary Issues and Studies migrants). (February): 84-102. Goldstein, Sidney. 1990. Explains urbanization * Focuses on effects of urban reclassification and migration. "Urbanization in China, trends and analyzes * Argues that the main factor behind strong growth in urban 1982-87: Effects of factors contributing to population was reclassification of urban areas in 1984, which Migration and urbanization in China reduced minimum population requirements and extended city Reclassification." for 1982-87; uses 1982 and town boundaries to include adjoining areas and counties. Population and census and 1987 national - Reclassification, rather than migration, accounts for most of Development Review survey to analyze urban- the dramatic increase in the labor force in towns (labor force 16 (4): 673-701. ization and 1986 national grew by 231 percent) and cities (labor force grew by 33 migration survey to ana- percent). lyze internal migration. * Official data (1987 survey) identify only about 30 million Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 73 Source Summary Abstract migrants-that is, permanent migrants and migrants with per- mits. Thus it underestimates the true size and impact of migra- tion by excluding most temporary and illegal migrants. * Most migration flows were intraprovincial (80 percent) rather than interprovincial (20 percent). * Most of the migrants included in the study were young and were moving to cities and especially to towns for nonagricul- tural jobs. Yang, Xiushi, and Study based on official * Finds evidence that migration in Zhejiang is mainly from rural Sidney Goldstein. 1990. Chinese migration data to urban areas, is especially strong within the region (rather "Population Movement for the region of than interregional), is mostly temporary, and is mostly better- in Zhejiang Province, Zhejiang. educated people who migrate from rural to urban areas. China: The Impact of * Argues that government authorities allow temporary migra- Government Policies." tion flows but prohibit permanent migration in order to reduce International Migration rural surplus labor, avoid excessive strain on urban infrastruc- Review 23 (3). ture (because temporary migrants are not entitled to use all urban infrastructure and social services), and avoid having people leave rural areas and give up their land (thus reducing rural output and efficiency), and because temporary migration flows are possibly reversible, while permanent migration is not. a Urges the government to pay more attention to temporary migration because it strains urban infrastructure and leads to fundamental social and economic changes. Bramall, Chris, and Uses State Statistical * Compares the two data sources and finds that changes in Marion E. Jones. 1993. Bureau data and inequality in the official data are severely underestimated and "Rural Income 1984-85 data from the that the true increase in inequality since 1978 has been far Inequality in China Rural Policy Research larger. since 1978." The Unit of the State * The alternative data source estimates a rural Gini coefficient of Journal of Peasant Council. 0.40 in 1984-far higher than the official data. Studies 21(1): 41-70. * The alternative data source finds that the rise in rural inequal- ity mainly results from an increase in income inequality in the nonfarm sector. Moreover, rapid industrialization and unequal regional growth have resulted in higher interregional inequality. * Argues that migration is likely to exacerbate these inequalities because the experiences of other countries show that migrants are usually young and better skilled, hence worsening rural- urban disparities. One problem with this study is that it does not provide quantita- tive estimates of which factors have contributed to rising inequal- ities and by how much. Moreover, the claim that migration is likely to worsen rural-urban inequalities is not based on concrete evidence but rather on evidence from other countries, such as Brazil. 74 Sharing Rising Incomes: Disparities in China Source Summary Abstract McKinley, Terry, and Uses data from a 1988 * In 1988 rural land was distributed relatively equally in China. Keith Griffin. 1993. nationwide survey Moreover, the value of the land was highly equal by interna- "The Distribution of on landholdings of tional standards. Land in Rural China." about 10,000 rural * Equal land distribution and land value has a minor effect on The Journal of Peasant households. income inequalities because land has become an increasingly Studies 21(1): 71-84. less important source of income. * The study also examines the effect of land leasing but finds that it has a very little disequalizing effect on rural incomes. Cornia, Giovanni * Compares the experiences of transition economies in Eastern Andrea. 1994. Europe (especially Romania and Russia) with China's experi- "Income Distribution, ence since 1978. Poverty and Welfare in * Finds that poverty and inequalities have risen dramatically in Transitional Economies: Eastern Europe but have remained relatively constant/low in A Comparison Between China. Eastern Europe and * Argues that macroeconomic reforms (trade liberalization, China." Journal of price reforms, and so on) are the main cause of rising poverty International and disparities in Eastern Europe, and thus disputes the notion Development 6(5): that the social system has failed the poor and benefits the bet- 569-607. ter off. In fact, Cornia finds evidence that social systems in Eastern Europe had a significant equalizing and moderating effect. o Although overall poverty has been reduced during the initial phase of reform in China, the increase in income disparities has been induced mainly by internal policy measures such as declining social expenditures, fiscal decentralization, and dis- mantling of the commune system. Annex 2 Survey of Literature on Inequality, Income Distribution, and Migration in China 75 Re erences W~~~~~~~S. Background papers Burgess, Robin. 1997. "Diversification and Welfare in Rural China." London School of Economics, Suntory-Toyota International Centre for Economics and Related Disciplines. Burgess, Robin, and Mamta Murthi. 1996. "Land, Nutrition and Welfare in Rural China." London School of Economics, Suntory-Toyota International Centre for Economics and Related Disciplines. Burgess, Robin, and Juzhong Zhuang. 1996. "Dimensions of Gender Bias in Intrahousehold Allocation in Rural China." London School of Economics, Suntory-Toyota International Centre for Economics and Related Disciplines. Naga, Ramses Abdul, and Robin Burgess. 1996. "Determination and Prediction of Household Permanent Income." London School of Economics, Suntory-Toyota International Centre for Economics and Related Disciplines. Ravallion, Martin, and Shaohua Chen. 1997. "When Economic Reform Is Faster than Statistical Reform: Measuring and Explaining Inequality in Rural China." World Bank, China and Mongolia Department, Washington, D.C. Zhang, Tao, and Heng-fu Zou. 1996. "Determinants of Provincial Income Growth in China." World Bank, Policy Research Department, Washington, D.C. Other references ADB (Asian Development Bank). 1997. Emerging Asia: Changes and Challenges. Manila. Ahuja, Vinod, Benu Bidani, Francisco Ferreira, and Michael Walton. 1997. Everyone's Miracle? Revisiting Poverty Reduction and Inequality in East Asia. A Directions in Development book. Washington, D.C.: World Bank. Alesina, Alberto, and Dani Rodrik. 1994. "Distributive Policies and Economic Growth." Quarterly Journal of Economics 109 (May): 465-90. Bardhan, Pranab. 1996. "Research on Poverty and Development Twenty Years after Redistribution with Growth." In Michael Bruno and Boris Pleskovic, eds., Annual World Bank Conference on Development Economics 1995. Washington, D.C.: World Bank. Bauer, J., W Feng, N.E. Riley, and X. Zhou. 1992. "Gender Inequality in Urban China: Education and Employment." Modern China 18 (3): 333-70. 77 111 :X:f Bramall, Chris, and Marion E. Jones. 1993. "Rural Income in Rural China." International Labour Organization, Asian Inequality in China since 1978." Journal of Peasant Studies 21 Employment Programme, Geneva. (1): 41-70. Griffin, Keith, and Renwei Zhao, eds. 1993. The Distribution of Burgess, Robin, Liwei Zhu, and Yun Ren. 1996. "Chinese Urban Income in China. New York: St. Martin's Press. Household Expenditure Analysis 1986-1990." Economic and Gundlach, Erich. 1996. "Solow Meets Market Socialism: Social Research Council Series 14. London School of Regional Convergence of Output per Worker in China." Kiel Economics and Political Science, Development Economics Working Paper 726. Kiel Institute of World Economics, Research Programme. Department IV, Germany. Chen, Shaohua, and Martin Ravallion. 1996. "Data in Transition: Hare, Denise, and Shukai Zhao. 1996. "Labor Migration as a Assessing Rural Living Standards in Southern China." China Rural Development Strategy: A View from the Migration Economic Review 7 (1): 23-55. Origin." Paper presented at the International Conference of China Ministry of Agriculture, Rural Economy Research Center Rural Labor in China, June 25-27, Beijing. Study Group. 1996a. "Analysis of the Income and Expenditure Howes, Stephen. 1993a. "Income Distribution: Measurement, Patterns of Migrants in Shanghai." Beijing. Transition and Analysis of Urban China, 1981-1990." Ph.D. . 1996b. "Zhongguo Nongcun Laodongli Liudong Yanjiu: dissertation. London School of Economics and Political Waichuzhe Yu Shuchudi." Summary report presented at the Science. Ford Foundation's International Conference on China Rural . 1993b. "Income Inequality in Urban China in the 1980s: Labor Mobility, June, Beijing. Levels, Trends and Determinants." Economic and Social China State Statistical Bureau. 1996. China Statistical Yearbook Research Council Series 3. London School of Economics, 1996. Beijing. Development Economics Research Programme. Cornia, Giovanni Andrea. 1994. "Income Distribution, Poverty Howes, Stephen, and Athar Hussain. 1994. "Regional Growth and Welfare in Transitional Economies: A Comparison between and Inequality in Rural China." London School of Economics, Eastern Europe and China." Journal of International Suntory-Toyota International Centre for Economics and Development 6 (5): 569-607. Related Disciplines. Datt, Gaurav, and Martin Ravallion. 1996. "Why Have Some Hussain, Athar. 1994. "Social Security in Present-Day China and Indian States Done Better than Others at Reducing Rural its Reform." American Economic Review Papers and Poverty?" Policy Research Working Paper 1594. World Bank, Proceedings 84 (May): 276-80. Policy Research Department, Washington, D.C. Hussain, Athar, Peter Lanjouw, and Nicholas Stern. 1994. Deininger, Klaus, and Lyn Squire. 1996. "A New Data Set "Income Inequalities in China: Evidence from Household Measuring Income Inequality." The World Bank Economic Survey Data." World Development 22 (12): 1947-57. Review 10 (3): 565-91. Jalan, Jyotsna, and Martin Ravallion. 1996a. "Are There Deininger, Klaus, Lyn Squire, and Tao Zhang. 1995. "Measuring Dynamic Gains from a Poor-Area Development Program?" Income Inequality: A New Data Base." World Bank, Policy Policy Research Working Paper 1695. World Bank, Policy Research Department, Washington, D.C. Research Department, Washington, D.C. Entwisle, Barbara, Gail E. Henderson, Susan E. Short, Jill Bouma, . 1996b. "Transient Poverty in Rural China." Policy and Zhai Fengying. 1995. "Gender and Family Business in Research Working Paper 1616. World Bank, Policy Research Rural China." American Sociological Review 60 (February): Department, Washington, D.C. 36-57. Jian, Tianlun, Jeffrey D. Sachs, and Andrew M. Warner. 1996. FBIS (Foreign Broadcast Information Service). 1995. "Rural "Trends in Regional Inequality in China." NBER Working Migrant Worker Economic Data Analyzed." Beijing. Paper 5412. National Bureau of Economic Research, . 1996a. "PRC: Critique of Governor Responsibility Cambridge, Mass. System for Grain." Beijing. Khan, Azizur Rahman, Keith Griffin, Carl Riskin, and Zhao . 1996b. "PRC: Urban Floating Population Causes Social Renwei. 1992. "Household Income and Its Distribution in Problems." Beijing. China." The China Quarterly 132: 1029-61. Feng, Lu. 1996. "Why Does China's Grain Policy Tend to Knight, John, and Li Shi. 1996. "Educational Attainment and the Compromise the Efficiency Objective-A Neglected Issue for Rural-Urban Divide in China." Oxford Bulletin of Economics China's Grain Policy Research." Working Paper 1996002. and Statistics 58 (1): 83-117. Peking University, China Center for Economic Research, Mason, Andrew D. 1997a. "Dimensions of the Labor Market in Beijing. China: Rural Labor Markets and Rural, Urban, and Regional Findlay, Christopher. 1997. "Grain Sector Economic Reform in Linkages." Background paper prepared for this report. World China." Paper presented at the Australian Agricultural and Bank, Washington, D.C. Resource Economics Society Conference, sponsored by the . 1997b. "Gender Issues in the China Labor Market." University of Adelaide's Chinese Economy Research Centre, Background paper prepared for this report. World Bank, January, Gold Coast. Washington, D.C. Fishlow, Albert. 1996. "Inequality, Poverty, and Growth: Where Maurer-Fazio, Margaret, Thomas G. Rawski, and Wei Zhang. Do We Stand?" In Michael Bruno and Boris Pleskovic, eds., 1997. "Gender Wage Gaps in China's Labor Market: Size, Annual World Bank Conference on Development Economics Structure, Trends." Paper presented at the annual meeting of 1995. Washington, D.C.: World Bank. the Asian Studies Association, March 13-17, Chicago. Gelbach, Jonah B., and Lant H. Pritchett. 1995. "Does More for McKinley, Terry. 1996. The Distribution of Wealth in Rural the Poor Mean Less for the Poor? The Politics of Tagging." China. New York: M.E. Sharpe. Policy Research Working Paper 1523. World Bank, Policy McKinley, Terry, and Keith Griffin. 1993. "The Distribution of Research Department, Washington, D.C. Land in Rural China." The Journal of Peasant Studies 21 (1): Griffin, Keith, and Ashwani Saith. 1981. "Growth and Equality 71-84. 78 Sharing Rising Incomes: Disparities in China Meng, Xin. 1996. "Regional Wage Gap, Information Flow and Decentralized Econoniv. A World Bank Country Study. Rural-Urban Migration." Australian National University, Washington, D.C. School of Pacific and Asian Studies, Department of Economics . 1995b. "China: Regional Disparities." Report 14499- Research, Canberra. CHA. China and Mongolia Department, Washington, D.C. Meng, Xin, and Paul Miller. 1995. "Occupational Segregation and . 1996a. "China: Higher Education Reform." Report Its Impact on Gender Wage Discrimination in China's Rural 15573-CHA. Washington, D.C. Industrial Sector." Oxford Economic Papers 47 (1): 136-55. . 1996b. "China: Issues and Options in Health Financing." Mody, Ashoka, and Fang-Yi Wang. 1995. "Explaining Industrial Report 152-8-CHA. China and Mongolia Department and Growth in Coastal China: Economic Reforms ... and What Human Development Department, Washington, D.C. Else?" PSD Occasional Paper 2. World Bank, Private Sector . 1996c. "China: Pension System Reform." Report 15121- Development Department, Washington, D.C. CHA. China Resident Nilssion and China and Mongolia Ravallion, Martin. 1997. "Poor Areas." In David Giles and Aman Department, Washington, D.C. Ullah, eds., The Handbook of Applied Economic Statistics. . 1996d. The Chinese Economy: Figbtinig Intf.tion. New York: Marcel Dekkar. Deepening Reformis. A World Bank Country Study. Riley, Nancy E. 1995. "Chinese Women's Lives: Rhetoric and Washington, D.C. Reality." Asia-Pacific Issues 25. East-West Center, . 1996e. Povertv Reductionz anid the World Bank: Progress Honolulu. and Challenzges in the 1990s. Washington, D.C. Riskin, Carl. 1993. "Poverty in China's Countryside: Legacy and . 1996f. WTorld Development Report 1996: Froml PI.an to Change." In Pranab Bardhan, Mrinal Datta-Chaudhuri, and Market. New York: Oxford Universitv Press. T.N. Krishnan, eds., Development and Change: Essays in . 1997a. At Cbina s Table: Food Security Options. Honour of K.N. Ra/. Bombav: Oxford University Press. Washington, D.C. Rozelle, Scott, Li Guo, Mlinggao Shen, and others. 1997. "Poverty, . 1997b. "Memorandum and Recommendation of the Networks, Institutions, or Education: Testing Among President of the International Bank for Reconstruction and Competing Hypotheses on the Determinants of Migration in Development to the Executive Directors on a Proposed Loan of China." Paper presented at the annual meeting of the $30 Msillion to the People's Republic of China for a Qinba Association for Asian Studies, Chicago. Mountains Poverty Reduction Project." Report P7090-CHA. Summers, Robert, and Alan Heston. 1991. "The Penn World Washington, D.C. Table (Mark 5): An Expanded Set of International Wu, Guobao, Sue Richardson, and Peter Travers. 1995. "Rural Comparisons, 1950-1988." Qtuarterl-v Journal of Econoniics Povertv and Its Causes in China." Working Paper 95. 106: 327-68. University of Adelaide, Chinese Economy Research Unit. Taylor, J. Edward, and Irma Adelman. 1996. Village Economies: Australia. The Design, Estimation and Use of Villageivide Economic . 1996. "NMultiple Deprivation in Rural China." Working Mlodels. Cambridge: Cambridge Universlty Press. Paper. University of Adelaide, Chinese Economy Research Unit, WX'atson, Andrew, and Harry X. Wu. 1994. "Regional Disparities Australia. in Rural Enterprise Growth." In Christopher Findley, Andrew Wu, Harry, and Zhou Li. 1996. "Research on Rural to Urban X'Watson, and Harry X. Wu, eds., Rural Enterprises in China. Labour Migration in Post-Reform China: A Survey." Working New York: St. Martin's Press. Paper 71. University of Adelaide, Chinese Economy Research West, Lorraine A.. 1995. "Regional Economic Variation and Basic Unit, Australia. Education in Rural China." Robert S. McNamara Fellowship Yang, Dennis Tao, and Hao Zhou. 1996. "Rural-Urban Disparity Program. World Bank, Economic Development Institute, and Sectoral Labor Allocation in China." Paper presented at the Washington, D.C. annual meeting of the Association for Asian Studies, April, World Bank. 1992. "China: Strategies for Reducing Poverty in the Honolulu, Hawaii. 1990s." Report 10409-CHA. China and Mongolia Yang, L., and J.S. Zax. 1996. "Compensation for Holding up Department, Environment, Human Resources, and Urban Half the Sky: Gender-linked Income Differences in Urban Development Operations Division, Washington, D.C. China" University of Colorado, Department of Economics, 1995a. China: Macroecononiic Stability in a Boulder. References 79 IBRD 28801 7O- 8b~ 9,0 1600 110O1 0 130, 5O~~~~~~~~~~~~~ k ~~~~~~~~~~~~RUSSIA N FEDERATIO N 0 KAZAKHSTAN I UZBEKISTAN cc KYRGYZ ~-REPUIBLIC This map was produced ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~~~~~~~~~~~~~~~~~~~~~AGST19 li T H E W O R L D B A N K 1818 H Street, N.W. Washington, D.C. 20133 USA Telephone: 202-477 1234 Facsimile: 202- 477 6391 Telex: MCI 64145 WORLDBANK MCI 248423 WORLDBANK Cable Address: INTRAFRAD WASHINGTONDC World Wide Web: http://www.worldbank.org/ E-mail: Books@world bank.org 9 780821 340752 Cover design by Glenn Pierce/The Magazine Group ISBN 0-8213-4075-1