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Regional Income Inequality in China: A Two-Stage Nested Inequality Decomposition Analysis

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Abstract

This study estimates regional income inequality in China over the 1995-1998 period using a Theil index based upon district-level GDP and population data, and conducts a two-stage nested inequality decomposition analysis to explore the factors of regional income inequality. It also performs a regression analysis to explore the possible determinants of within-province income inequality. The decomposition analysis shows that the within-province inequality component accounted for 62 % of overall regional income inequality in 1998, while the between-region component contributed 27 %. According to the regression analysis, cumulative per capita FDI and a dummy variable designating inland border provinces are found to be significant in explaining within-province inequality. It is also found that economic dualism, as denoted by a low ratio of agricultural labor productivity to labor productivity in non-agricultural sectors, is another significant factor contributing to within-province inequality.

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  • Takahiro Akita, 2001. "Regional Income Inequality in China: A Two-Stage Nested Inequality Decomposition Analysis," Working Papers EMS_2001_05, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2001_05
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    File URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2001_05.pdf
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    1. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
    2. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    3. Takahiro AKITA & Rizal Affandi LUKMAN & Yukino YAMADA, 1999. "Inequality In The Distribution Of Household Expenditures In Indonesia: A Theil Decomposition Analysis," The Developing Economies, Institute of Developing Economies, vol. 37(2), pages 197-221, June.
    4. Tsui, Kai-yuen, 1996. "Economic reform and interprovincial inequalities in China," Journal of Development Economics, Elsevier, vol. 50(2), pages 353-368, August.
    5. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
    6. Takahiro Akita, 2000. "Decomposing Regional Income Inequality Using Two-Stage Nested Theil Decomposition Method," Working Papers EMS_2000_02, Research Institute, International University of Japan.
    7. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-920, July.
    8. Takahiro Akita & Armida S. Alisjahbana, 2001. "The Economic Crisis and Regional Income Inequality in Indonesia," Working Papers EMS_2001_06, Research Institute, International University of Japan.
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    Cited by:

    1. Gravier-Rymaszewska, Joanna & Tyrowicz, Joanna & Kochanowicz, Jacek, 2010. "Intra-provincial inequalities and economic growth in China," Economic Systems, Elsevier, vol. 34(3), pages 237-258, September.
    2. Reuter & Ulrich, 2004. "The Effects of Intraregional Disparities on Regional Development in China: Inequality Decomposition and Panel-Data Analysis," Econometric Society 2004 Far Eastern Meetings 716, Econometric Society.
    3. Li, Yong & Oberheitmann, Andreas, 2009. "Challenges of rapid economic growth in China: Reconciling sustainable energy use, environmental stewardship and social development," Energy Policy, Elsevier, vol. 37(4), pages 1412-1422, April.
    4. Sergio Rey & Myrna Sastré-Gutiérrez, 2010. "Interregional Inequality Dynamics in Mexico," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(3), pages 277-298.

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