Rural people's perception of income adequacy in China

Purpose - The purpose of this paper is to investigate rural people's perception of income adequacy in order to understand how it is affected by income in the county where the respondent lives, age of household members, as well as number of household members. The paper also aims to find out how poverty lines and poverty counts derived from people's perception relate to what has been previously reported. Design/methodology/approach - The Subjective Poverty Line (SPL) methodology is modified by asking one question on the amount of grains necessary for the respondent's household and another on the amount of cash necessary. Information was obtained from a large survey covering 22 provinces in 2003 and analysed using regressions analysis. Findings - People in high‐income counties perceive that more cash, but not grains are needed than those living in low‐income counties. Respondents perceive that economies of scale exist in amounts of cash needed for a household. They also perceive that young children need less grain than adults and that a schoolchild incurs higher money expenditures than an adult. A poverty line for rural China derived by the SPL methodology is higher than the low income line used by the National Bureau of Statistics for 2002. However, a poverty count based on the SPL methodology is similar to what has been reported. Practical implications - The findings suggest that poverty lines for rural China preferably should consider not only spatial differences in cost of living but also the number of household members in a non‐linear way. Originality/value - The paper describes the first application of the SPL approach to rural China.