Inequality and public policy in China

Abstract

Inequality and Public Policy in China, edited by Bjorn A. Gustafsson, Li Shi and Terry Sicular. Cambridge: Cambridge University Press, 2008. xviii + 364 pp. £50.00/US$90.00 (hardcover), US$72.00 (eBook). This is a rigorous and well-executed book by leading scholars of China's economic and social transformation. It provides a rare fusion of rigorous empirical analysis, clear presentation, good-quality data and thoughtful attention to public policy concerns. The book represents the major collective output of the third phase of an initiative to examine changing patterns of inequality in reformera China. Prior surveys covering 1988 and 1995 led to landmark publications on changing patterns of inequality in the transitional economy. The current study, based on data for 2002, continues to document these changes following major state sector reforms and coinciding with significant policy changes with respect to rural areas and social welfare. To capture the complex dynamic of rural-urban changes, this round is the first to add a sample of over 5,000 migrants from 12 provinces to the existing rural and urban samples. The book starts with an excellent introduction which should become a standard text for anyone looking for an accessible review of trends in income distribution over China's recent reform period. It provides an admirable review of key findings from the study, along with a clear discussion of data sources and measurement issues. Major findings (elaborated in Chapters 2 to 5) include stable (not increasing) inequality since 1995; a decline in poverty over this period - though much faster in urban than in rural areas; and an increase in wealth inequality, particularly within rural China, where the Gini coefficient for wealth now exceeds that for income. Spatial (rural-urban) inequalities have continued to rise; education is an increasing contributor to inequality, while political factors such as Party membership now contribute less. While some of the differences with other studies are explained in terms of methods for calculating income, in particular the inclusion of subsidies, others are explained in terms of the changing pattern and stage of China's structural transformation and various public policy interventions. In contrast to many earlier studies of this type, the book moves beyond an assessment of how far China is moving towards the market allocation of resources, with inequalities reflecting either market imperfections or returns to endowments; instead, certain inequalities are viewed as a policy problem which require state or public policy engagement, including redistributive interventions, to ensure a more equitable outcome. All chapters in some way address the wider policy context, with reference to public action contributing, positively or negatively, to distributional outcomes. Issues addressed include social protection mechanisms (particularly dibao), health and unemployment benefits, land policies and discrimination against migrants, and the pivotal role of the tax system. A valuable discussion explains the increasing inequality in rural wealth in terms of policies which prevent farmers from realizing the true value of land. This story contrasts with that in urban areas, where the distribution of wealth was already more unequal than that of income. …