The Income Redistribution Effect of Government Transfer Programs

Abstract

The use of the trajectory of the Gini coefficient of total income formed by the increase in transfer income combined with the minimum Gini coefficient curve enables us to provide a comprehensive examination of the effect of government income redistribution policies, measure the efficiency of transfer income for income redistribution, and redress the methodological defects of research using the MT index and Gini coefficient decomposition. The findings of our new method of estimation show that China’s social security expenditure can reduce the income gap, but its efficiency in terms of redistribution is relatively low and has already passed the turning point of the Gini coefficient trajectory, resulting in some people being “over-allocated.” Readjusting the distribution of governmental transfers can help lower the Gini coefficient of residents’ total income.