China is still poor in per capita terms

China is still poor in per capita terms - The trend of the...

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The trend of the Gini coefficient of China Jiandong Chen 1 Dai Dai 2 Ming Pu 3 Wenxuan Hou 4 Qiaobin Feng 5 January 2010 BWPI Working Paper 109 Creating and sharing knowledge to help end poverty 1 Southwestern University of Finance and Economics, Chengdu, PR China cjd9754@yahoo.com 2 Southwestern University of Finance and Economics, Chengdu, PR China postdd@swufe.edu.cn 3 Southwestern University of Finance and Economics, Chengdu, PR China pu_ming@hotmail.com 4 Durham University, UK wenxuanhou@126.com 5 Southwestern University of Finance and Economics, Chengdu, PR China qbfeng@hotmail.com Brooks World Poverty Institute ISBN : 978-1-907247-08-8 www.manchester.ac.uk/bwpi
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2 Abstract A literature review indicates that the main problem in calculating the Gini coefficient of Chinese residents’ income is the shortcomings of the data sources. Though many studies have tried to overcome these limitations through decomposing the nationwide Gini ratio by urban and rural areas, the final results have been underestimated, due to the overlap term or residual in the decomposition. This paper analyses the effects of the overlap term on calculating the overall Gini coefficient through a statistical approach, and estimates Chinese Gini ratios since economic reform and open door policies were adopted. Based on decomposing the Chinese Gini coefficient from 1978 to 2006, the authors find that the key factor of income inequality comes from income disparity between rural and urban inhabitants. The authors investigate the features of this income inequality between rural and urban areas. Furthermore, statistical approaches are employed to evaluate the effects of the development of urbanisation and rural-to-urban average income on the income inequality of the whole nation. The results show that accelerating the pace of urbanisation is the key issue to improving Chinese income disparity. On the basis of the above analysis, the paper proposes related policies for policy-makers. 1 Keywords : Chinese Gini coefficient; Decomposition of Gini coefficient; Urbanisation Jiandong Chen 2 is Associate Professor, South Western University of Finance and Economics (SWUFE), Chengdu, China. Dai Dai is a Lecturer at South Western University of Finance and Economics (SWUFE), Chengdu, China. Ming Pu is Associate Professor, South Western University of Finance and Economics (SWUFE), Chengdu, China. Wenxuan Hou is Lecturer in Finance, Durham Business School, Durham University, UK. Qiaobin Feng is Professor, South Western University of Finance and Economics (SWUFE), Chengdu, China. 1 This study is subsidised by the project of ‘211’ three sub-discipline construction with subject of Public Finance of Southwest University of Finance and Economics. 2 Corresponding author.
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3 1. Introduction There are various means to measure income inequality, among them the Theil index, coefficient of variation, Kuznets index, the Gini coefficient, etc. However, the Lorenz curve and the Gini coefficient are most commonly used (Sloman, 2000). The Gini
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China is still poor in per capita terms - The trend of the...

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