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Income Disparity and Economic Growth: Evidence from China

Author

Listed:
  • Duo Qin

    (Queen Mary, University of London)

  • Marie Anne Cagas

    (Asian Development Bank)

  • Geoffrey Ducanes

    (Asian Development Bank)

  • Xinhua He

    (Chinese Academy of Social Sciences)

  • Rui Liu

    (Chinese Academy of Social Sciences)

  • Shiguo Liu

    (Chinese Academy of Social Sciences)

Abstract

This paper carries out a pilot empirical study on how income inequality affects growth and the macro economy by means of incorporating panel data information into a macro-econometric model. China is used as the pilot field. Provincial urban and rural household data are used to construct inequality measures, which are then used to augment household consumption equations in the ADB China model. Model simulations are performed to study the effect of inequality on GDP growth and its sectoral components. Results show that inequality is a robust explanatory variable of consumption and that the way inequality develops over time carries certain negative consequences on GDP and sectoral growth.

Suggested Citation

  • Duo Qin & Marie Anne Cagas & Geoffrey Ducanes & Xinhua He & Rui Liu & Shiguo Liu, 2005. "Income Disparity and Economic Growth: Evidence from China," Working Papers 548, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:548
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2005/items/wp548.pdf
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    References listed on IDEAS

    as
    1. Francois Bourguignon & Luiz A. Pereira da Silva, 2003. "The Impact of Economic Policies on Poverty and Income Distribution : Evaluation Techniques and Tools," World Bank Publications - Books, The World Bank Group, number 15090.
    2. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    3. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    4. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    5. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    6. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
    7. repec:dau:papers:123456789/10091 is not listed on IDEAS
    8. Bourguignon, Francois, 1981. "Pareto Superiority of Unegalitarian Equilibria in Stiglitz' Model of Wealth Distribution with Convex Saving Function," Econometrica, Econometric Society, vol. 49(6), pages 1469-1475, November.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo & Magtibay-Ramos, Nedelyn & Quising, Pilipinas, 2007. "A macroeconometric model of the Chinese economy," Economic Modelling, Elsevier, vol. 24(5), pages 814-822, September.
    2. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo & Magtibay-Ramos, Nedelyn & Quising, Pilipinas, 2007. "A macroeconometric model of the Chinese economy," Economic Modelling, Elsevier, vol. 24(5), pages 814-822, September.

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    More about this item

    Keywords

    Income inequality; Growth; Econometric model; China;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D3 - Microeconomics - - Distribution
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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