Open AccessIncome inequality in China 1952-2017: persistence and main determinants
Author(s) -
Marinko Škare,
Luis A. Gil-Alaña,
Gloria ClaudioQuiroga,
Romina Pržiklas Družeta
Publication year - 2021
Publication title -
oeconomia copernicana
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.59
H-Index - 13
eISSN - 2353-1827
pISSN - 2083-1277
DOI - 10.24136/oc.2021.028
Subject(s) - economics , economic inequality , total factor productivity , index (typography) , gini coefficient , inequality , china , per capita income , urbanization , income distribution , gross domestic product , income inequality metrics , development economics , productivity , labour economics , demographic economics , macroeconomics , economic growth , mathematical analysis , demography , mathematics , sociology , world wide web , computer science , political science , law
Research background: China's economic growth, however remarkable, is due to the Harrod-Domar nature of economic growth and, therefore, limited. The main limitation lies in the extension of the neoclassical growth model and the government need to decrease regional disparities using new migration, urbanization and social policy.
Purpose of the article: It is the rising regional disparity in the total factor productivity to cause the income inequality increase (measured by GINI index) in China from 1952?2017. Our paper brings new insight into the main inequality determinants and causes in China, using a fractional integration modeling framework.
Methods: Using fractional integration, we find total factor productivity (TFP), real gross domestic product per capita and growth and expenditures for the social safety net and employment effort to have a statistically significant impact on GINI. Income inequality in China is of a persistent nature with the effects of the shocks affecting the GINI index enduring over time.
Findings & value added: The results of this study highlight the importance for model/policy changes by the policy makers and practitioners in China to deal with the inequality issue. This involves improving the growth model through innovation and technological advancement, relaxing TFP dependence on the physical inputs (labor and capital) to reduce income inequality.