Economic Growth, Inequality and Poverty Reduction in China

Transcription

1 Economic Growth, Inequality and Poverty Reduction in China Sangui Wang Renmin University of China Economic Growth, Poverty and Inequality in China 1

2 China has achieved remarkable economic growth since late 1970s when China launched its reform and opening-up policies. Per capita GDP grew from RMB 379 to RMB 5573 at 1978 constant price during the time period of 1978 to 2010 Annual growth rate is 8.8 percent China has successfully lifted hundreds of millions of its citizens out of poverty Using the World Bank s preferred $1.25/day consumption poverty line, China reduced poverty from million (84.0%) to million (13.1%) from 1981 to 2008 Enlarging income inequality accompanied fast economic growth Gini coefficient of per capita income increased from to 46.9 from 1981 to 2008 The poor benefited from economic growth 2

3 Empirical analysis find that the elasticity of poverty reduction to growth is at the range of 1-3 for the headcount index Elasticity was during (official GDP and poverty estimation) Elasticity was -2.7 during (household income growth and WB poverty estimation(ravallion and Chen, 2007)) Agricultural growth has a much bigger impact on poverty reduction Elasticity of poverty reduction to agricultural growth is 1.13 (official GDP and poverty estimation) the elasticity of poverty reduction to agricultural growth Ravallion and Chen (2007) estimated is 8 The impact of agricultural growth on poverty reduction is at least twice as big as that of overall GDP growth Growth is not very pro-poor If we define pro-poor as income growth rate of the poor exceeds the average growth rate, economic growth has not been pro-poor since late 1980s Analysis based on national representative household income survey finds that Income growth rates of the poorest 70% of the population are below average growth rate during the time period of Income distribution improved in 2000s, but the bottom half of the population is still not favored during the time period of Using NBS group income data, Ravallion and Chen also find that income growth is progressively pro-rich in the 1990s. The growth rates of the poorest 80% of the population is below average income growth rate (6.2%) and income of the richest 10% of the population grew 1.5 times faster than that of the poorest 10% of the population 3

4 Source: Luo (2012) Ravallion and Chen,

5 Economic growth and income distribution in poor areas of China are not pro-poor ether Income growth rate of the poorest 40% of the population is below average in designated poor counties during the time period of Income growth rates increase steadily with the increase of the income level, indicating enlarging income inequality in poverty stricken areas in China. Income growth of different in designated poor counties Year Lowest Second Third Forth Highest Growth rate(02-10) Growth rate(03-05) All 5

6 There are short time period when economic growth is propoor economic growth during the time period of is pro-poor, especially pro the poorest 10% of the population (grew 61% faster than the richest 10% of the population) growth is strongly pro-poor during the time period of 2003 to 2005 in poor counties, the poorest 20% of the population grew 75% faster than the richest 20% of the population Poverty Reduction Programs Are Pro-poor Regions Year Poorest 20% of pop. in poor counties Poor village Poor county Rural China Income ratio of poor pop. to rural areas Income ratio of poor villages to rural areas Income ratio of poor counties to rural areas Growth rate (02-08)

7 What Makes Economic Growth Propoor or Less Pro-poor in China? Income distribution is determined by various factors including distribution of resources and production factors such as land, physical and human capitals, structure change of the economy, institutional arrangements and policies that affect both growth and distribution. Factors contributed to worsening income distribution and non propoor growth: Evolution of economic structure from labor intensive agriculture to industry and service Transformation from a planned economy to a market economy Urbanization and rural-urban migration Unequal distribution of human capital Fiscal and financial policies Lack of social warfare programs in rural areas Inappropriate implementation of poverty alleviation programs Monopoly on economic resources and services by interest groups and corruption of government officials Factors contributed to pro-poor growth Equal land distribution among rural households Sustained agricultural growth Agricultural tax reform Establishment of social welfare program in rural China in late 2000s Implementation of 9 years compulsory education and new cooperative health care 7

8 Policy options l Improving income distribution to ensure the poor benefit more from economic growth l Maintaining a steady growth process l Encouraging the development of labor intensive sectors with comparative advantage l Emphasizing more on human development to ensure the poor can take advantage of market opportunities while maintaining investment in physical capital l Early child development l Extending compulsory basic education to 12 years l Improve rural health services to ensure the poor can benefit from the system l To achieve the above objectives, fiscal reform is necessary to ensure equal access to public services 8

9 l Adopting appropriate targeting mechanism in poverty programs l Regional targeting and self-targeting for infrastructure projects l Activity targeting for education and health programs l Household and self-targeting for productive activities 9