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China’s Inequality is Important – but which Inequality?

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  • John Knight

Abstract

This think-piece questions the normative value in the Chinese case of standard measures of aggregate income inequality such as the Gini coefficient. Evidence is adduced that people have narrow frames of reference and that they distinguish between income inequalities that they perceive to be fair and those that they perceive to be unfair. It is suggested that value judgements about what is fair or unfair can be guided by people’s own perceptions. People’s perceptions of unfairness can also be important to a government concerned to avoid social instability. The estimation of happiness functions can help to make the relevant distinctions. Examples are given of how fair and unfair inequalities might be identified. Unfairness might be more strongly perceived and felt in inequalities of economic power than in inequalities of income, although the former can in turn result in inequalities of income. An argument is made for China researchers to extend inequality research and research instruments towards an economics of fairness and unfairness.

Suggested Citation

  • John Knight, 2016. "China’s Inequality is Important – but which Inequality?," CSAE Working Paper Series 2016-20, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-20
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    References listed on IDEAS

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    1. Knight, John & Song, Lina, 1999. "The Rural-Urban Divide: Economic Disparities and Interactions in China," OUP Catalogue, Oxford University Press, number 9780198293309.
    2. Azizur Rahman Khan & Keith Griffin & Carl Riskin & Zhao Renwei, 1993. "Household Income and its Distribution in China," Palgrave Macmillan Books, in: Keith Griffin & Zhao Renwei (ed.), The Distribution of Income in China, chapter 1, pages 25-73, Palgrave Macmillan.
    3. Li,Shi & Sato,Hiroshi & Sicular,Terry (ed.), 2013. "Rising Inequality in China," Cambridge Books, Cambridge University Press, number 9781107002913, January.
    4. Easterlin, Richard A. & Morgan, Robson & Switek, Maggie & Wang, Fei, 2013. "China's Life Satisfaction, 1990-2010," IZA Discussion Papers 7196, Institute of Labor Economics (IZA).
    5. John Knight & Ramani Gunatilaka, 2010. "The Rural-Urban Divide in China: Income but Not Happiness?," Journal of Development Studies, Taylor & Francis Journals, vol. 46(3), pages 506-534.
    6. Knight, John, 2013. "The economic causes and consequences of social instability in China," China Economic Review, Elsevier, vol. 25(C), pages 17-26.
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    More about this item

    Keywords

    Fairness; Frames of reference; Gini coefficient; Inequality of income; Inequality of economic power; Unfairness;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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