Abstract
I use household panel data to study the dynamics of relative poverty in China, Germany, the United Kingdom, and the United States. Compared to the three Western countries, not only is relative poverty more common in China, it is also deeper and more severe. Transient poverty accounts for less than half of the total poverty in Germany or the US, but about two-thirds of that in China or the UK. Over three waves, 87% of Germans, 78% of Britons, 71% of Americans, but only 46% of Chinese were never poor. Using a multinomial logistic regression model, the determinants of poverty are found to be very similar across the four countries. But the variance explained by that model is much smaller for China than for the three Western countries. The findings of this paper also challenge some existing understanding of poverty dynamics in general.
Highlights
China has a very impressive record of poverty reduction
Using the $1-aday poverty line, 65 percent of the Chinese population were poor in 1981. This dropped to 10 percent in 2004, meaning that half a billion people were lifted out of poverty (World Bank, 2009)
Since ‘the absolute number of poor in the developing world as a whole declined from 1.5 to 1.0 billion over the same period . . . but for China there would have been no decline in the numbers of poor in the developing world over the last two decades of the 20th century’ (World Bank, 2009, p. iii)
Summary
China has a very impressive record of poverty reduction. Using the $1-aday poverty line, 65 percent of the Chinese population were poor in 1981. Existing research is mainly concerned with absolute poverty This was quite appropriate when China was a very poor country. To determine the poverty dynamics of individuals, I analyse household panel data in this paper. As high quality Chinese household panel data have recently become available, I am able to compare China with Germany, the UK, and the US. As it turns out, this comparison brings out just how distinctive the Chinese case is.
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