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The redistributive role of government social security transfers on inequality in China

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  • Cai, Meng
  • Yue, Ximing

Abstract

The purpose of this paper is to evaluate the redistributive role of government social security transfers on inequality in China. We attempt to answer two questions. First, does inequality of after-transfer income narrow, compared to that of before-transfer income? Second, given the scale and distribution of existing government social security transfers, will a small percentage increase in the transfers narrow or widen the inequality of total income? By employing the methodologies of the Musgrave-Thin (MT) index and decomposition of the Gini coefficient of total income by its sources, we find a positive answer to the first question and a negative answer to the second question. Government social security transfers have a positive role on inequality in the sense that the Gini coefficient of after-transfer income is smaller than that of before-transfer income. However, government social security transfers have a negative role on inequality, as current inequality will go up if there is a universal increase in government social security transfers for all recipients. Of all the components of government social security transfers, formal sector pensions are most unequalizing, whereas dibao and rural pension benefits have equalizing effects on the income distribution in China.

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  • Cai, Meng & Yue, Ximing, 2020. "The redistributive role of government social security transfers on inequality in China," China Economic Review, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:chieco:v:62:y:2020:i:c:s1043951x20301097
    DOI: 10.1016/j.chieco.2020.101512
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    References listed on IDEAS

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    2. Nanak Kakwani & Xiaobing Wang & Ning Xue & Peng Zhan, 2022. "Growth and Common Prosperity in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(1), pages 28-57, January.
    3. Meng Cai & Jing Xu, 2022. "Evaluating the Redistributive Effect of Social Security Programs in China over the Past 30 Years," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(1), pages 58-81, January.
    4. Feng, Yidai & Liu, Yaobin & Yuan, Huaxi, 2022. "The spatial threshold effect and its regional boundary of new-type urbanization on energy efficiency," Energy Policy, Elsevier, vol. 164(C).
    5. Yang, Sui & Zhao, Xiaoman, 2024. "The income redistribution effect of social security in China," China Economic Review, Elsevier, vol. 83(C).
    6. Li Yang, 2021. "Towards equity and sustainability? China’s pension system reform moves center stage," Working Papers halshs-03215912, HAL.
    7. Dan Pan & Jinlong Zhou & Yi Yu & Shengdong Chen, 2024. "Rural Collective Property Rights System Reform and Urban-Rural Income Gap: A County-Scale Big Data Analysis in China," SAGE Open, , vol. 14(3), pages 21582440241, August.
    8. Parro, Francisco, 2024. "Unveiling the impact of income taxes on inequality in a HACT model," Journal of Macroeconomics, Elsevier, vol. 79(C).
    9. Zhang, Yanan & Harper, Sarah, 2022. "The impact of son or daughter care on Chinese older adults' mental health," Social Science & Medicine, Elsevier, vol. 306(C).
    10. Huixia Zou & Shaowei Li & Huiyuan Zou & Wei Sun & Yingnan Niu & Chengqun Yu, 2022. "Livelihood Sustainability of Herder Households in North Tibet, China," Sustainability, MDPI, vol. 14(9), pages 1-14, April.
    11. Peihua Deng & Ronnie Schöb, 2022. "Group-Specific Redistribution, Inequality, and Subjective Well-Being in China," CESifo Working Paper Series 9847, CESifo.
    12. Feng, Yidai & Yuan, Huaxi & Liu, Yaobin, 2023. "The energy-saving effect in the new transformation of urbanization," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 41-59.
    13. Rui Zhou, 2022. "Measurement and Spatial-Temporal Characteristics of Inclusive Green Growth in China," Land, MDPI, vol. 11(8), pages 1-36, July.
    14. Li Yang, 2021. "Towards equity and sustainability? China’s pension system reform moves center stage," World Inequality Lab Working Papers halshs-03215912, HAL.
    15. Ligang Liu & Zhiwu Xiao & Yang Deng, 2023. "Who Does “Endowment Insurance†Support: The Elderly or Their Grown-up Children?," SAGE Open, , vol. 13(4), pages 21582440231, November.

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