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2. Poverty Reduction in China: Trends and Causes
- Author:
- Guanghua Wan and Yin Zhang
- Publication Date:
- 12-2006
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Applying the Shapley decomposition to unit-record household survey data, this paper investigates the trends and causes of poverty in China in the 1990s. The changes in poverty trends are attributed to two proximate causes; income growth and shifts in relative income distribution. The Foster-Greer-Thorbecke measures are computed and decomposed, with different datasets and alternative assumptions about poverty lines and equivalence. Among the robust results are: (i) both income growth and favourable distributional changes can explain China's remarkable achievement in combating poverty in rural areas in the first half of the 1990s; (2) in the second half of the 1990s, both rural and urban China suffered from rapidly rising inequality and stagnant income growth, leading to a slow-down in poverty reduction, even reversal of poverty trend.
- Topic:
- Development, Economics, and Poverty
- Political Geography:
- China and Asia
3. Poverty Accounting by Factor Components: With an Empirical Illustration Using Chinese Data
- Author:
- Guanghua Wan
- Publication Date:
- 06-2006
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- The purpose of this paper is to develop two poverty decomposition frameworks and to illustrate their applicability. A given level of poverty is broadly decomposed into an overall inequality component and an overall endowment component in terms of income or consumption determinants or input factors. These components are further decomposed into finer components associated with individual inputs. Also, a change in poverty is decomposed into components attributable to the growth and redistributions of factor inputs. An empirical illustration using Chinese data highlights the importance of factor redistributions in determining poverty levels and poverty changes in rural China.
- Topic:
- Development, Economics, and Poverty
- Political Geography:
- China and Asia
4. Globalization and the Urban Poor in China
- Author:
- Guanghua Wan and Yin Zhang
- Publication Date:
- 04-2006
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper examines the distributional impact of globalization on the poor in urban China. Employing the kernel density estimation technique, we recovered from irregularly grouped household survey data the income distribution for 29 Chinese provinces for 1988-2001. Panels of the income shares of the poorest 20, 10 and 5 per cent of the urban residents were then compiled. In a fixed-effect model, two of the central conclusions of Dollar and Kraay (2002)—that 'the incomes of the poor rise equi-proportionately with average income' and that trade openness has little distributional effect on poverty—were revisited. Our results lend little support to either of the Dollar-Kraay conclusions, but instead indicate that average income growth is associated with worsening income distribution while globalization in general, and trade openness in particular, raises the income shares of the poor. It is also found that openness to trade and openness to FDI have differential distributional effects. The beneficial effect of trade was not restricted to the coastal provinces only, but also weakened significantly after 1992. These findings are robust to allow for nonlinearity in the effect of globalization and to control for the influence of several other variables.
- Topic:
- Economics, Globalization, and Poverty
- Political Geography:
- China and Asia
5. Why Do Poverty Rates Differ From Region to Region? The Case of Urban China
- Author:
- Guanghua Wan and Yin Zhang
- Publication Date:
- 08-2005
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper proposes a semi-parametric method for poverty decomposition, which combines the data-generating procedure of Shorrocks and Wan (2004) with the Shapley value framework of Shorrocks (1999). Compared with the popular method of Datt and Ravallion (1992), our method is more robust to misspecification errors, does not require the predetermination of functional forms, provides better fit to the underlying Lorenz curve and incorporates the residual term in a rigorous way. The method is applied to decomposing variations of urban poverty across the Chinese provinces into three components – contributions by the differences in average nominal income, inequality and poverty line. The results foreground average income as the key determinant of poverty incidence, but also attach importance to the influence of distribution. The regional pattern of the decomposition suggests provincial groupings based not entirely on geographical locations.
- Topic:
- Demographics, Economics, and Poverty
- Political Geography:
- China and Asia
6. Globalization and Regional Income Inequality: Evidence from within China
- Author:
- Guanghua Wan, Zhao Chen, and Ming Lu
- Publication Date:
- 11-2004
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- China's recent accession to the WTO is expected to accelerate its integration into the world economy, which aggravates concerns over the impact of globalization on the already rising inter-region income inequality in China. This paper discusses China's globalization process and estimates an income generating function, incorporating trade and FDI variables. It then applies the newly developed Shapley value decomposition technique to quantify the contributions of globalization, along with other variables, to regional inequality. It is found that (a) globalization constitutes a positive and substantial share to regional inequality and the share rises over time; (b) capital is one of the largest and increasingly important contributor to regional inequality; (c) economic reform characterized by privatization exerts a significant impact on regional inequality; and (d) the relative contributions of education, location, urbanization and dependency ratio to regional inequality have been declining.
- Topic:
- Economics and Globalization
- Political Geography:
- China and Asia
7. Output and Price Fluctuations in China's Reform Years: What Role did Money Play?
- Author:
- Guanghua Wan and Yin Zhang
- Publication Date:
- 08-2004
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- The Chinese economy underwent cyclical fluctuations in growth and inflation in the reform period. Contrasting views exist on the role of money in such fluctuations. This paper assesses these views employing structural VEC models based on the exchange equation. It is found that in the long run money accommodates, rather than causes, changes in output and prices. In the short run, price fluctuations are mostly attributable to shocks that have permanent effects on prices and money but not on real output. These shocks also account for a large proportion of fluctuations in money, and strongly influence the movements of output.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- China and Asia
8. What Accounts for China's Trade Balance Dynamics?
- Author:
- Guanghua Wan and Yin Zhang
- Publication Date:
- 08-2004
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper proposes a structural VAR model which extends the frameworks of Hoffmaister and Roldós (2001) and Prasad (1999). The model is then used to analyse the sources of China's trade balance fluctuations in the period of 1985–2000. Efforts are made to distinguish the forces which underlie the long-run trend in trade balance from those with transitory impacts. The effects of four types of shock are examined—the foreign supply shock, the domestic supply shock, the relative demand shock, and the nominal shock. Among other findings, two emerge as important. First, the movements in China's trade are largely the result of real shocks. Second, the Renminbi is undervalued, yet changes in the exchange rate bear little on the trade balance. Therefore, monetary measures would not suffice to redress China's trade 'imbalance'.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- China and Asia
9. Income Inequality in Rural China: Regression-based Decomposition Using Household Data
- Author:
- Guanghua Wan and Zhangyue Zhou
- Publication Date:
- 08-2004
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- A considerable literature exists on the measurement of income inequality in China and its increasing trend. Much less is known, however, about the driving forces of this trend and their quantitative contributions. Conventional decompositions, by factor components or by population subgroups, only provide limited information on the determinants of income inequality. This paper represents an early attempt to apply the regression-based decomposition framework to the study of inequality accounting in rural China, using household level data. It is found that geography has been the dominant factor but is becoming less important in explaining total inequality. Capital input emerges as a most significant determinant of income inequality. Farming structure is more important than labour and other inputs in contributing to income inequality across households.
- Topic:
- Demographics, Development, and Economics
- Political Geography:
- China and Asia