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Appendix II - The 2002 and 2007 CHIP Surveys
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- By Song Jin, Chinese Academy of Social Sciences, Terry Sicular, University of Western Ontario, Yue Ximing, Renmin University of China
- Edited by Shi Li, Beijing Normal University, Hiroshi Sato, Hitotsubashi University, Tokyo, Terry Sicular, University of Western Ontario
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- Rising Inequality in China
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- 05 July 2013
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- 31 October 2013, pp 465-486
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Summary
General Remarks
The China Household Income Project (CHIP) data sets consist of urban, rural, and, for 2002 and 2007, rural-urban migrant samples. The sizes of these samples are not proportional to their shares in the Chinese national population. Also, their regional distributions differ from those in the population. Consequently, weights are needed in order to make the samples nationally representative.
In this Appendix we discuss the calculation of sample weights that can be used for analysis of the 2002 and 2007 CHIP data. We calculate these weights using data provided by the National Bureau of Statistics (NBS) from the 2000 census and the 2005 1 percent population sample survey, hereafter called the “2005 mini census.” The census and mini census are the most complete available accountings of China's population. Our sample weights are designed to reflect population shares in the census and the mini census.
We begin with a discussion of the CHIP sampling design and its implications for the calculation of weights (Section II). The calculation of weights requires data on population shares by geographic location and by urban, rural, and migrant classification, which we obtain using data from the 2000 census and the 2005 mini census. Section III discusses the census and mini-census data that we use for this purpose. In order to construct and apply the weights consistently, we must classify the location of residence for all individuals and households and make sure that there is no double counting. The classification of location is discussed in Section IV. The last section of this Appendix raises some suggestions for implementation of the weights in the analysis of the data.
10 - Redistributive Impacts of the Personal Income Tax in Urban China
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- By Xu Jing, Renmin University of China, Yue Ximing, Renmin University of China
- Edited by Shi Li, Beijing Normal University, Hiroshi Sato, Hitotsubashi University, Tokyo, Terry Sicular, University of Western Ontario
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- Rising Inequality in China
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- 05 July 2013
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- 31 October 2013, pp 362-383
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Summary
Introduction
Taxation is a major source of fiscal revenue and has a strong effect on income distribution. Taxation can either reduce inequality or make inequality worse, depending on the type and rate of taxation. Generally, a personal income tax will improve inequality, whereas a general sales tax will exacerbate inequality. This is because with the former, there is a statutory rate that increases with income, and with the latter, tax is collected from everyone based on consumption rather than on earnings. Therefore, a tax system that relies heavily on a general sales tax as opposed to a personal income tax has an adverse impact on income distribution. This is precisely the case in China.
A tax is progressive if tax liability relative to income rises as income increases. Typically, the statutory rate of the personal income tax increases with income, thus it is progressive. In fact, it is usually the most progressive element in the tax system. Given that the personal income tax is progressive, the extent to which it contributes to reducing inequality depends on its rate, or the proportion of the personal income tax to the total income. As will be seen later in this chapter, the contribution of the personal income tax to reduce inequality mainly depends on two components, its progressivity and the average tax rate. Additional contributions can be derived by raising the average rate of the personal income tax while holding the progressivity constant, or vice versa. It is clear that the personal income tax in China is progressive because there is a very high statutory marginal rate. The extent of the contribution of the personal income tax to inequality therefore relies on the average proportion of the tax in the total income.
Appendix I - The 2007 Household Surveys
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- By Luo Chuliang, Beijing Normal University, Li Shi, Beijing Normal University, Terry Sicular, University of Western Ontario, Deng Quheng, Université de Lyon-CNRS-GATE Lyon Saint-Etienne, Yue Ximing, Renmin University of China
- Edited by Shi Li, Beijing Normal University, Hiroshi Sato, Hitotsubashi University, Tokyo, Terry Sicular, University of Western Ontario
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- Rising Inequality in China
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Summary
To track the dynamics of income distribution in China, the Chinese Household Income Project (CHIP) has conducted four waves of household surveys, in 1988, 1995, 2002, and lastly 2007. These surveys were carried out as part of a collaborative research project on incomes and inequality in China organized by Chinese and international researchers, with assistance from the National Bureau of Statistics (NBS). The CHIP project participants and other researchers have analyzed the data from the first three waves and published a wide range of articles, reports, and books. Descriptions of the CHIP surveys and key findings can be found in Griffin and Zhao (1993); Riskin, Zhao, and Li (2001); and Gustafsson, Li, and Sicular (2008). This volume not only contains analyses based on the data from the fourth wave, 2007 but also uses data from the earlier waves to understand trends over time.
Eichen and Zhang (1993) describe the 1988 survey, and Li et al. (2008) describe the 1995 and 2002 surveys. This Appendix provides basic information about the 2007 survey. The CHIP surveys are closely related to the NBS household survey. Li et al. (2008) discuss how the NBS household survey samples were selected. Additional details about the NBS household surveys can be found in recent NBS statistical reports and publications.
4 - Educational Inequality in China
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- By John Knight, Beijing Normal University, Terry Sicular, University of Western Ontario, Yue Ximing, Renmin University of China
- Edited by Shi Li, Beijing Normal University, Hiroshi Sato, Hitotsubashi University, Tokyo, Terry Sicular, University of Western Ontario
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- Rising Inequality in China
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- 31 October 2013, pp 142-196
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Summary
Introduction
The intergenerational distribution of education has received less attention from economists than has the intragenerational distribution. Yet, the degree of intergenerational transmission of education – the transfer of educational outcomes from parents to children – is an important determinant of the distribution of education among households at any point in time. This, in turn, influences the distribution of income among households.
There are two concepts of intergenerational mobility. One focuses on aggregate mobility, that is, the extent to which the average education of one generation exceeds that of the previous generation. In the aggregate, economic growth, household incentives, and the policies of the state can all serve to promote mobility. A second concept focuses on mobility at the microeconomic level, that is, the extent to which the education of an individual depends on, or is related to, the education of her parents. In this case, state policies that equalize educational opportunities may be offset by the tendency for children of better-educated parents to receive more education than children of less well-educated parents.
3 - Housing Ownership, Incomes, and Inequality in China, 2002–2007
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- By Hiroshi Sato, Hitotsubashi University, Terry Sicular, University of Western Ontario, Yue Ximing, Renmin University of China
- Edited by Shi Li, Beijing Normal University, Hiroshi Sato, Hitotsubashi University, Tokyo, Terry Sicular, University of Western Ontario
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- Rising Inequality in China
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- 31 October 2013, pp 85-141
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Introduction
An important feature of the post-Mao period has been the resurrection of private property rights. A variety of interrelated policies, including the lifting of prohibitions on private enterprise, ownership reforms in industry, the development of stock markets, and real estate and housing reforms, have paved the way for the expansion of private property and household wealth, with implications for incomes and inequality. Estimates by Li, Luo, and Sicular in Chapter 2 of this volume, calculated using the 2002 and 2007 China Household Income Project (CHIP) surveys, show that the share of household income derived from financial assets and housing and their contribution to income inequality has increased, especially in urban China.
In this chapter we examine changes in private ownership of housing and the implications for the distribution of housing wealth and income. We focus on housing wealth rather than on total wealth mainly because the CHIP 2007 data do not contain sufficient information to permit the estimation of total wealth. Housing wealth, however, can provide insights into the role of total wealth, because housing is the single most important household asset in China. Past studies of wealth in China have found that privately owned housing constitutes nearly 60 percent of household wealth and accounts for two-thirds of inequality in wealth among households (Li and Zhao 2008; Zhao and Ding 2008).
Appendix: The 1995 and 2002 Household Surveys: Sampling Methods and Data Description
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- By Li Shi, Professor of economics School of Economics and Business, Beijing Normal University, Luo Chuliang, Associate Professor Institute of Economics of the Chinese Academy of Social Sciences, Beijing, China, Wei Zhong, Professor Institute of Economics of the Chinese Academy of Social Sciences, Beijing, China, Yue Ximing, Professor School of Finance, Renmin University of China, Beijing, China
- Edited by Björn A. Gustafsson, Li Shi, Beijing Normal University, Terry Sicular, University of Western Ontario
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- Inequality and Public Policy in China
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- 25 July 2009
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- 07 April 2008, pp 337-354
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Summary
Following the successful completion of the first two Chinese household income (CHIP) surveys for 1988 and 1995, a new survey project team, composed of researchers from the Institute of Economics of the Chinese Academy of Social Sciences (CASS) together with associated Chinese and international scholars, and with the assistance of the National Bureau of Statistics (NBS), conducted a third survey in the spring of 2003 for the reference year 2002. The aim of the third survey was to examine the dynamic changes in income distribution in China that had taken place since 1988 and 1995.
Project teams from the 1988 and 1995 surveys published their analyses and research results in two volumes, Griffin and Zhao (1993) and Riskin, Zhao, and Li (2001). The first of these volumes contains an appendix describing the sampling method and data description for the 1988 survey, but the second volume lacks such an appendix for the 1995 survey. In view of this, and since most of the chapters in this volume use data from both the 1995 and 2002 surveys, this appendix describes both the 1995 and 2002 samples.
The CHIP surveys are closely related to the NBS household surveys, so we first give a brief explanation of how the NBS household survey samples were selected. We then describe the sampling method and data for the 1995 and 2002 surveys.
13 - The Redistributive Impact of Taxation in Rural China, 1995–2002: An Evaluation of Rural Taxation Reform at the Turn of the Century
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- By Hiroshi Sato, Professor in the Graduate School of Economics Hitotsubashi University, Tokyo, Japan, Li Shi, Professor of economics School of Economics and Business, Beijing Normal University, Yue Ximing, Professor School of Finance, Renmin University of China, Beijing, China
- Edited by Björn A. Gustafsson, Li Shi, Beijing Normal University, Terry Sicular, University of Western Ontario
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- Inequality and Public Policy in China
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- 25 July 2009
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- 07 April 2008, pp 312-336
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Introduction
Setting the Agenda
“The agricultural tax has become history” (People's Daily, December 31, 2005). The Chinese government announced abolition of agricultural taxes on January 1, 2006. This was a goal of the “rural tax and fee reform” (hereafter referred to as rural taxation reform) initiated in the late 1990s and an important turning point in rural public policy in China. This chapter examines the redistributive impact of rural taxation using the 1995 and 2002 CHIP surveys and the administrative village survey of 2002. The analytical focus is on changes in tax regressivity between 1995 and 2002.
An empirical study of the redistributive impact of rural taxation is important not only because ad hoc collection of taxes and levies – so-called arbitrary charges, fines, and levies (luan shoufei, luan fakuan, luan tanpai) – has been one of the hottest issues in rural public policy throughout the 1990s, but also because a critical aspect of the Chinese local politico-economic system, that is, the multilayered and decentralized local administrative/fiscal system, is embodied in the issue. So far, however, few empirical studies, with some exceptions such as Khan and Riskin (Chapter 3 in this volume) and Tao, Liu, and Zhang (2003), have used nationally representative microdata to examine the redistributive outcomes of rural taxation.
The structure of this chapter is as follows. In the latter half of this section, the background of the topic is discussed. Section II summarizes the process of rural taxation reform.
2 - Income Inequality and Spatial Differences in China, 1988, 1995, and 2002
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- By Björn Gustafsson, Professor Department of Social Work at Göteborg University, Sweden, Li Shi, Professor of economics School of Economics and Business, Beijing Normal University, Terry Sicular, Professor of economics Department of Economics at the University of Western Ontario, London, Ontario, Canada, Yue Ximing, Professor School of Finance, Renmin University of China, Beijing, China
- Edited by Björn A. Gustafsson, Li Shi, Beijing Normal University, Terry Sicular, University of Western Ontario
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- Inequality and Public Policy in China
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- 25 July 2009
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- 07 April 2008, pp 35-60
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Summary
Introduction
Since the introduction of reforms first in rural areas in the late 1970s and then in urban areas at the beginning of the 1980s, China has moved rapidly toward a market economy. The policy of opening up and marketization has speeded China's economic growth, which was extremely rapid during the 1990s. Growth has been accompanied by China's transformation from a predominantly agrarian economy to an industrial and service-based economy, with a marked increase in urbanization.
Long-run historical examples from the West show that often industrialization goes hand in hand with increased inequality in the distribution of household income, although later this trend reverses (see, e.g., Morrisson 2000). More recently the experiences of countries in Eastern Europe and the former Soviet Union show that the transition from a planned to a market economy is a history of increased income disparities (see, e.g., Milanovic 1998). Thus from different perspectives, rising inequality in China during the 1980s and 1990s was not unexpected.
This chapter presents empirical support for the idea that since the mid-1990s the development of overall income inequality in China has entered a new phase. We show that Lorenz curves and summary measures of income inequality for China as a whole indicate a more or less unchanged inequality in the distribution of income between 1995 and 2002. We also show that this is the net outcome of inequality-increasing and inequality-reducing forces. Urban-rural inequality continued to increase as a proportion of total inequality as it had from 1988 to 1995.
4 - Explaining Incomes and Inequality in China
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- By Yue Ximing, Professor School of Finance, Renmin University of China, Beijing, China, Terry Sicular, Professor of economics Department of Economics at the University of Western Ontario, London, Ontario, Canada, Li Shi, Professor of economics School of Economics and Business, Beijing Normal University, Björn Gustafsson, Professor Department of Social Work at Göteborg University, Göteborg, Sweden
- Edited by Björn A. Gustafsson, Li Shi, Beijing Normal University, Terry Sicular, University of Western Ontario
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- Inequality and Public Policy in China
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- 25 July 2009
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- 07 April 2008, pp 88-117
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Summary
Introduction
After the mid-1980s income inequality in China increased markedly and has now reached a level that is relatively high by international standards. Underlying this increase was China's transition from a planned to a market economy. Prior to the transition a wide array of policies and programs had depressed income differentials. Wage differentials in urban areas were compressed and based largely on seniority and the ownership classification of the enterprise. In rural areas collective farms distributed earnings in an egalitarian fashion, and income inequality was mainly the result of differences among collective farms in resource endowments. Opportunities for households and individuals to engage in private income-generating activities were severely restricted.
With economic reforms the government has allowed, if not encouraged, some people to get rich first. In urban areas wage differentials and bonuses have increased; in rural areas farming is now household-based, and income differences reflect variation in household resources, abilities, and effort. Restrictions on private economic activities have been lifted, permitting diversification in sources of income and allowing returns to entrepreneurship. Such changes have naturally contributed to greater inequality.
The transition has led not only to a higher level of inequality, but also to a change in the underlying determinants of incomes and inequality. Markets now play a much enlarged role in the determination of incomes. As the scope of markets expands, one would expect incomes, and therefore inequality, to reflect differences in underlying productive characteristics and endowments such as land and labor endowments, education, and so on.