3_Poverty and Inequality

3_Poverty and Inequality - Social Issues in Contemporary...

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Unformatted text preview: Social Issues in Contemporary China Inequality and Poverty Some Key Changes Brought by Market Reform Decollectivization/household responsibility system Rise of township and village enterprises, rural industry Reform/shut-down of state-owned enterprises Emergence of urban private sector and labor markets Relaxation of restrictions on population movement Erosion of subsidies/benefits/safety nets, many of which were associated with work tenure and collectives More recently, efforts to rebuild welfare services-- e.g., urban pension system, rural cooperative medical scheme Economic Growth and Improvement of the Quality of Life A six-fold increase in GDP from 1984 through 2004, the fastest growing economy in Asia Real GDP Growth: 11.5 percent in the first three quarters of 2007. This pace of growth has brought real changes in people's lives In 1985 average income in China was $293; in 2006 the average income is $2,025. Source: World Bank: "China Quick Facts" Economic Growth and Poverty Alleviation By 2001, China had met the foremost of the Millennium Development Goals -- to reduce the 1990 incidence of poverty by half -- and it had done so 14 years ahead of the 2015 target date for the developing world as a whole. More than 400 million people were lifted above the $1 dollar a day poverty level in the last 20 years. Between 1981-2001, poverty fell by 422 million. Source: World Bank: "China Quick Facts" Economic Growth and Poverty Alleviation "The picture that emerges is one of enormous momentum, of positive change in so many areas and a willingness to confront and resolve the hard issues of development....In a relatively short time, China has emerged as a country of truly global stature, having joined the World Trade Organization, strengthened ties with ASEAN and won the right to host the 2008 Olympics. This is a more dynamic, more confident China and rightly so. The simple fact is that more than 250 million people in the past 20 years have been lifted from poverty here. The problems confronting China have not been totally overcome -- far from it -but the magnitude of this achievement in a single generation is such that other countries should learn from it." ...President of the World Bank Group, Mr. James D. Wolfensohn, BEIJING, May 30, 2002 Economic Growth and Poverty Alleviation Between 1981 and 2001, the proportion of population living in poverty in China fell from 53 percent to just eight percent. Significantly, half the reduction occurred in the first half of the 1980s, and the decline was not continual thereafter, with periods of some set-backs for China's poor (such as the late 1980s and late 1990s). Returning the responsibility for farming to individual households brought huge gains to the country's poorest. Poverty Headcount Index Incidence The of poverty (headcount index) share of the population whose income or consumption is below the poverty line, that is, the share of the population that cannot afford to buy a basic basket of goods. A common example: the percentage of the population living on less than $1/day. Source: World Bank, Choosing and Estimating Poverty Indicators Key Poverty Facts Poverty is still predominantly a rural problem--the urban-rural gap is not going away. Urban poverty is still a small problem in relative terms. There are large provincial differences in rural poverty rates, with western provinces highly disadvantaged. Growth played a positive and significant role in poverty reduction. This is true for both rural and urban sectors, and for all poverty lines and periods. Economic Growth and Rising Inequality The gap between rich and poor rivals the US and is growing Poverty remains an enormous problem: 18% Source: World Bank: "China Quick Facts" of the world's poor live in China About 150 million people live on less than $1 a day New problem of urban poverty Measuring Inequality: GINI Index Actual Equality Measuring Inequality: Gini Index The Lorenz curve maps the cumulative income share on the vertical axis against the distribution of the population on the horizontal axis. In this example, 40 percent of the population obtains around 20 percent of total income (red example) The Gini coefficient is the area between the line of perfect equality and the observed Lorenz curve, as a percentage of the area between the line of perfect equality and the line of perfect inequality (area A divided by the sum of areas A and B). If one individual receives all the income, the Lorenz curve would pass through the points (0,0), (100,0) and (100,100), and the surfaces A and B would be similar, leading to a value of one for the Gini-coefficient. If each individual had the same income, or total equality, the income distribution curve would be the straight line in the graph the line of total equality. (e.g., 40 percent of the population would have 40 percent of the income.) (blue example) Actual Equality The coefficient varies between 0, which reflects complete equality and 1, which indicates complete inequality (one person has all the income or consumption, all others have none). 11 Source: World Bank, "Measuring Inequality" Measuring Inequality: Theil Index One of the disadvantages of the Gini coefficient is that it is not additive across groups, i.e. the total Gini of a society is not equal to the sum of the Ginis for its sub-groups. Theil-index: While less commonly used than the Gini coefficient, the Theil-index of inequality has the advantage of being additive across different subgroups or regions in the country. The Theil index, however, does not have a straightforward representation and lacks the appealing interpretation of the Gini coefficient. The Theil index is part of a larger family of measures referred to as the General Entropy class. Gini Coeficients in 80s and 90s: Comparative Perspective Regional Inequality Regional inequality should be rooted in the enlarged income gap at individual level, due to differences in human capital or in the returns Income gaps between rural and urban, and between coastal and inland regions are key elements of inequality Regional inequality is rising and growing faster in rural than in urban areas Rural-urban inequality is a very significant dimension of regional inequality, but perhaps not fully recognized (Wan, 2007) Who Are the Poor? Mostly rural, especially but not exclusively western provinces Those with poor health poorly-educated Minorities Disabled persons Women At-risk urban population Floating population Urban Poverty Trends (Meng, Gregory and Wan 2007) During the 19862000 period, the poverty head count index in urban areas.... increased between 1986 and 1993, remained at a high level after 1993 for five years, and fell after 1998. By 2000, the poverty rate had fallen from its peak of 12 percent (1993) to 8 percent. With different way of calculating poverty line, which incorporate changes in food prices and availability, and the prices of educational, healthcare and housing. Then use per capita income or expenditure to calculate the proportion of population under poverty line. Measuring the Depth of Poverty Poverty it Gap Ratio: gives the total resources needed to bring all the poor to the level of the poverty line. (it is obtained by adding up all the shortfalls of the poor and dividing the total by the population) The squared poverty gap also takes into account the inequality among the poor. Urban Poverty Trends (Meng, Gregory and Wan 2007) The depth of urban poverty is worsening, especially over the 1990s Although income increases in urban China pushed the average household to higher living standards, economic circumstances among urban poor households may not have improved in the 1990s. Urban Poverty Trends (Meng, Gregory and Wan 2007) In the early 1990s, price reform led to a significant increase in food prices, which play an important role in determining living standards of the poor. Acceleration of social welfare reform switched government provision of medical care, old age pensions, and highly subsidized education and housing to more reliance on individual provision. Poor households were particularly affected by enterprise restructuring, which increased the urban unemployment rate from 6 percent in 1993 to 12 percent in 2000. Who Are the Urban Poor? Recent Patterns of Unemployment Government Policy: Di Bao Program To help offset increasing rates of urban poverty, the government introduced the Urban "Di Bao" program (the minimum living allowance) toward the end of the period (19972000). "Di Bao" guaranteed a minimum income defined with respect to a local poverty line for individuals with urban registration. Major Predictors of Urban Poverty (Meng, Gregory and Wan 2007) Demographic structure and labor market involvement of households Poverty increased most in larger households and households with fewer working members Human capital Households with more educated heads/ spouses, and more workers employed in higher paying occupations had a lower probability of being poor Major Predictors of Urban Poverty (Meng, Gregory and Wan 2007) Regional Provinces higher average income levels, relative to the poverty line, had less poverty Provinces with a high level of state sector employment have lower poverty in the first period and higher poverty in the second period. Provinces with higher food prices have higher poverty. Food price reform is one of the major contributing factors to poverty increases in the early 1990s. Regions with the largest inequality in the early period tended to have less poverty, partly because inequality was primarily generated by higher incomes at the top of the income distribution. In the second period, this effect disappeared. effects: Discussion Considering the film China in the Red viewed last week, and the readings (China in 2005/2006). In what ways do the case studies in the documentary illustrate larger social problems associated with poverty and inequality under market reform? Assignment Discuss group projects Start reading for next week's topic: demographic changes ( E-reserves will be posted on BB) Next class: A brief introduction to political campaigns and its impact on people's life Watch "To Live" Youth culture Cultural change/Media Family issues Urban life Rural life Development and poverty Education Gender relations Migration ...
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This note was uploaded on 03/09/2008 for the course ASIA/SSP 198 taught by Professor Zhang during the Spring '08 term at Lehigh University .

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