China's household income and its distribution, 1995 and 2002

China Quarterly

Volumn , Issue 182, 2005, Pages 356-384

  Khan, Azizur Rahman ^a   Riskin, Carl ^b,c  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b CITY UNIVERSITY OF NEW YORK   (United States)

^c Och Spine at New York Presbyterian Hospitals   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

HOUSEHOLD INCOME; INCOME DISTRIBUTION; RURAL-URBAN COMPARISON;

ASIA; CHINA; EASTERN HEMISPHERE; EURASIA; FAR EAST; WORLD;

EID: 22144441235     PISSN: 03057410     EISSN: None     Source Type: Journal    
DOI: 10.1017/S0305741005000238     Document Type: Article

References (42)

1. An independent international group of economists, in collaboration with the Economics Institute of the Chinese Academy of Social Sciences (CASS), first instituted a household survey in 1988 to estimate income and its distribution, in order to get around the problem that official data on household income were available only for highly aggregated groups, not individual households, and that the income definition underlying the official data suffered from numerous deficiencies. The survey was repeated in 1995 and, most recently, in 2002.
2. See A. R. Khan, Keith Griffin, Carl Riskin and Zhao Renwei, "Household income and its distribution in China," The China Quarterly, December 1992;
3. A. R. Khan and Carl Riskin, "Income and inequality in China," The China Quarterly, June 1998.
4. These issues have been discussed in detail in the published results of the 1988 and 1995 CASS surveys, for example Khan et al., "Household income" and Khan and Riskin, "Income and inequality." A research report in this journal (Chris Bramall, "The quality of China's household income surveys," The China Quarterly. No. 167 (2001)) provides a useful discussion of problems associated with household income surveys of China, including our own earlier ones. Some problems, such as under-representation of very poor, illiterate households and of very rich entrepreneurial ones, are endemic to such surveys, especially in developing countries. We share the belief that property income is understated by our surveys, although we are uncertain whether this problem has worsened between 1995 and 2002 (see n. 26). One particular and glaring weakness - the neglect of rural-urban migrants - we have attempted to remedy at least in part by means of the special survey of migrants included in the present study.
5. This conclusion should be regarded as tentative because the small sizes of provincial samples leave a large margin of error.
6. Similar details for the 1988 survey can be found in Khan and Riskin, "Income and inequality."
7. The sample of migrant households was chosen by first arbitrarily selecting the provincial capital city and one or two medium or small cities in each province included in the urban sample. City survey teams chose the neighbourhoods and households to survey in their cities, following the rule that 100 households be selected for each large city (mostly provincial capitals), and 50 households for medium or small cities. Only households living in resident communities (jiedao) were sampled, which ruled out including migrant workers living on construction sites or infactory dormitories. The number of households selected from any one jiedao was limited to ten. The sampling procedure lacked randomness but tried to achieve a fair degree of representation of the migrant population living in residential neighbourhoods.
8. Some parts of these common income elements, however, are excluded by NBS, such as income in kind and unemployment benefits. This may help to explain the overall difference in estimates. A fuller discussion of these issues is contained in an annex that may be obtained from the authors.
9. The growth rate according to the survey estimates rises to 5% if "net individual income from enterprises other than compensation for labour" is excluded from the income estimate for 1995. This item was absent from the 2002 survey. See annex available from the authors for a discussion of this point.
10. In view of the fail of "receipt from enterprises" to an insignificant level in 2002, this is abolished as an independent category although retained as a memo item in Table 3. This component is now added together with the residual "other income" category.
11. This is not shown separately in Table 5, but probably accounts for almost the entire difference between total employment and non-farm wage employment.
12. The growth rate in agricultural value added is calculated from Table 3-4 in National Bureau of Statistics, SYOC 2003.
13. The survey instrument asked for remittances from those normally living outside the household and separately for earnings obtained outside the village of family members normally living in the household. The figure reported in the text was a sum of these two, but with the second component limited to those who had lived at least 180 days outside the village.
14. See e.g. Asian Labour News at http://www.asianlabour.org/archives/ 001031.html, which cites a finding of a research institute of the Ministry of Agriculture that "the contribution [to average peasant income] from migrant workers' earnings rose ... to more than 40%" in 2003. However, a rough calculation comparing the total remittances claimed by this article with total rural income from the Statistical Yearbook, yields a contribution of about 19% from remittances.
15. For a fuller explanation, see Khan and Riskin, "Income and inequality."
16. The Gini ratio of rural income distribution estimated from the 1988 CASS survey was 0.338.
17. This reflects the fact that per capita land holdings are higher (population density lower) in poor and dry regions than in better off irrigated ones.
18. Simon Kuznets, in "Economic growth and income inequality," American Economic Review, 1955;
19. and "Quantitative aspects of the economic growth of nations," Economic Development & Cultural Change. 1963, hypothesized that early industrialization causes income inequality to increase up to some level of GDP perc capita, at which it starts to decrease again.
20. The convergence view, which developed from the neoclassical growth model of Solow (Robert M. Solow, A contribution to the theory of economic growth," Quarterly Journal of Economics, Vol. 70 (1956)) and others, argues that the spread of markets with development tends to equalize returns to factors of production everywhere.
21. See Robert Bario and Xavier Sala-i-Martin, "Convergence across states and regions," Brookings Papers on Economic Activity, No. 1 (1991).
22. See Justin Yifu Lin, Cai Fang and Li Zhou, "Social consequences of economic reform in China: an analysis of regional disparity in the transition period" (Beijing, UNDP, 1997).
23. See Barry Naughton, "Provincial economic growth in China: causes and consequences of regional differentiation," in Mary-Frances Renard, M. Audibert, J. F. Brun, J.L. Combes, and P. Guillaumont, China and Its Regions: Economic Growth and Reform in Chinese Provinces (New Horizons in International Business Series) (Northampton, MA: Edward Elgar, 2002).
24. See Khan and Riskin, "Income and inequality."
25. This is well in excess of the estimated total net rural-urban migration over the period, which is put at about 72 million persons between 1995 and 2000 (inclusive), or about 100.5 million, assuming net migration in 2001 and 2002 was similar in size to that in 2000. The excess loss of rural population of about 28.5 million is probably due mainly to the re-definition of formerly rural places as "towns." The number is, indeed, similar to Chan and Hu's rough estimate of a 30 million increase in urban population over the entire decade of the 1990s due to new town formation alone. See Kam Wing Chan and Yin, Hu, "Urbanization in China: new definition, different series, and revised trends," The China Review, Vol. 3, No. 2 (Fall 2003);
26. also Zai Liang and Zhingdong Ma, "China's floating population: now evidence from the 2000 census," Population and Development Review, Vol. 30, No. 3 (September 2004), pp. 467-488.
27. The NBS estimate of per capita income is 7.702.80 yuan. See NBS, SYOC 2003, Table 10-4.
28. Chris Bramall ("The quality of China's household income surveys") has argued that our 1995 study greatly underestimated urban subsidies. The basis for this claim was some rough but very high estimates of urban subsidies by the National Bureau of Statistics. While ours may not fully encompass all urban subsidies, they are based upon specific information collected by our survey instruments. We believe, for reasons we will furnish on request, that they are superior to the speculative numbers (called "crude estimates" by the World Bank) of the NBS exercise.
29. These growth rates are based on the weighted averages of rural and urban per capita personal incomes from CASS surveys for the three years, weights being proport onal to actual rural and urban populations (ignoring the migrants for whom no information is available for 1995).
30. It should be noted that the estimation of the rental value of urban housing reverted back to the method adopted in 1988, the interest on housing equity. In 1995 we used the direct information on actual house rent. The same information proved unusable for 2002.
31. It is hard to tell if the fall in the share of property income simply reflects the worsening of the problem of capturing enough income under this heading in the past. It is however possible that the main source of income from non-housing property, interest on saving's deposit, actually fell due to the fall in the rate of interest.
32. The strongly equalizing effect of this source of income, as well as its very small contribution to income, seems to be due to its coming from mostly small-scale activities concentrated among low income groups. Predominant among the migrants (see next section) it is not reported by many full status residents.
33. However, see n. 6 about the approach taken to sampling the migrants.
34. The "rural" enterprises that employ nearly 12% of the migrant workers and a negligible 0.1% of the urban resident workers may be the "agricultural" enterprises located in the rural periphery of urban districts. Alternatively, this may mean that periodically a proportion of urban migrants revert back to rural areas for employment. The survey is unclear on this subject.
35. The coefficient of variation in provincial per capita incomes is 0.246 for the migrants and 0.308 for the residents. The coefficient of variation in provincial Gini ratios is however higher for the migrants: 0.124 as compared to 0.093 for the residents.
36. These estimates ignore any change due to the change in the number and incomes of the migrants for whom no information is available for 1995.
37. Liang and Ma, "China's floating population."
38. There are reasons to believe that even this may be an underestimate of the actual number of migrants. Official statistics show an annual decline in rural population of 1.33% and an annual increase of 5.22% in urban population between 1995 and 2002. Assuming the same population share of rural China in 2002 as in 1995, there would have been 129 million more people in rural China than the actual number in 2002. Of course, some urbanization was simply a matter of re-defining formerly rural localities as urban.
39. See Khan and Riskin, "Income and inequality" and Inequality and Poverty in China.
40. For a convenient summary of the reforms in the hukou system, see Zhang Ye, "Hope for China's migrant women workers." China Business Review, May-June, 2002.
41. For details see Hussain, Urban Poverty in PRC.
42. "Single factoral terms of trade" measures the command of a unit of a factor of production (here, labour) over imports and is calculated by multiplying the net barter terms of trade (ratio of export to import prices) by an index of labour productivity in the export sector.