Publication: Poverty, Inequality, and Social Disparities During China's Economic Reform
Loading...
Date
2007-06
ISSN
Published
2007-06
Author(s)
Editor(s)
Abstract
China has been the most rapidly growing economy in the world over the past 25 years. This growth has fueled a remarkable increase in per capita income and a decline in the poverty rate from 64 percent at the beginning of reform to 10 percent in 2004. At the same time, however, different kinds of disparities have increased. Income inequality has risen, propelled by the rural-urban income gap and by the growing disparity between highly educated urban professionals and the urban working class. There have also been increases in inequality of health and education outcomes. Some rise in inequality was inevitable as China introduced a market system, but inequality may have been exacerbated rather than mitigated by a number of policy features. Restrictions on rural-urban migration have limited opportunities for the relatively poor rural population. The inability to sell or mortgage rural land has further reduced opportunities. China has a uniquely decentralized fiscal system that has relied on local government to fund basic health and education. The result has been that poor villages could not afford to provide good services, and poor households could not afford the high private costs of basic public services. Ironically, the large trade surplus that China has built up in recent years is a further problem, in that it stimulates an urban industrial sector that no longer creates many jobs while restricting the government's ability to increase spending to improve services and address disparities. The government's recent policy shift to encourage migration, fund education and health for poor areas and poor households, and rebalance the economy away from investment and exports toward domestic consumption and public services should help reduce social disparities.
Link to Data Set
Citation
“Dollar, David. 2007. Poverty, Inequality, and Social Disparities During China's Economic Reform. Policy Research Working Paper; No. 4253. © World Bank. http://hdl.handle.net/10986/7404 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Asymmetric Bank Distress Amplifier of Recessions(Washington, DC: World Bank, 2025-07-11)One defining feature of financial crises, evident in U.S. and international data, is asymmetric bank distress—concentrated losses on a subset of banks. This paper proposes a model in which shocks to borrowers’ productivity dispersion lead to asymmetric bank losses. The framework exhibits a “bank distress amplifier,” exacerbating economic downturns by causing costly bank failures and raising uncertainty about the solvency of banks, thereby pushing banks to deleverage. Quantitative analysis shows that the bank distress amplifier doubles investment decline and increases the spread by 2.5 times during the Great Recession compared to a standard financial accelerator model. The mechanism helps explain how a seemingly small shock can sometimes trigger a large crisis.Publication From Tailwinds to Headwinds(Washington, DC: World Bank, 2025-07-10)The first quarter of the twenty-first century has been transformative for emerging market and developing economies (EMDEs). These economies now account for about 45 percent of global GDP, up from about 25 percent in 2000, a trend driven by robust collective growth in the three largest EMDEs—China, India, and Brazil (the EM3). Collectively, EMDEs have contributed about 60 percent of annual global growth since 2000, on average, double the share during the 1990s. Their ascendance was powered by swift global trade and financial integration, especially during the first decade of the century. Interdependence among these economies has also increased markedly. Today, nearly half of goods exports from EMDEs go to other EMDEs, compared to one-quarter in 2000. As cross-border linkages have strengthened, business cycles among EMDEs and between EMDEs and advanced economies have become more synchronized, and a distinct EMDE business cycle has emerged. Cross-border business cycle spillovers from the EM3 to other EMDEs are sizable, at about half of the magnitude of spillovers from the largest advanced economies (the United States, the euro area, and Japan). Yet EMDEs confront a host of headwinds at the turn of the second quarter of the century. Progress implementing structural reforms in many of these economies has stalled. Globally, protectionist measures and geopolitical fragmentation have risen sharply. High debt burdens, demographic shifts, and the rising costs of climate change weigh on economic prospects. A successful policy approach to accelerate growth and development should focus on boosting investment and productivity, navigating a difficult external environment, and enhancing macroeconomic stability.Publication Intergenerational Income Mobility around the World(Washington, DC: World Bank, 2025-07-09)This paper introduces a new global database with estimates of intergenerational income mobility for 87 countries, covering 84 percent of the world’s population. This marks a notable expansion of the cross-country evidence base on income mobility, particularly among low- and middle-income countries. The estimates indicate that the negative association between income mobility and inequality (known as the Great Gatsby Curve) continues to hold across this wider range of countries. The database also reveals a positive association between income mobility and national income per capita, suggesting that countries achieve higher levels of intergenerational mobility as they grow richer.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication China - From Poor Areas to Poor People : China’s Evolving Poverty Reduction Agenda - An Assessment of Poverty and Inequality in China(World Bank, 2009-03-05)China's progress in poverty reduction over the last 25 years is enviable. One cannot fail to be impressed by what this vast nation of 1.3 billion people has achieved in so little time. In terms of a wide range of indicators, the progress has been remarkable. Poverty in terms of income and consumption has been dramatically reduced. Progress has also been substantial in terms of human development indicators. Most of the millennium development goals have either already been achieved or the country is well on the way to achieving them. As a result of this progress, the country is now at a very different stage of development than it was at the dawn of the economic reforms at the beginning of the 1980s. China's poverty reduction performance has been even more striking. Between 1981 and 2004, the fraction of the population consuming below this poverty line fell from 65 percent to 10 percent, and the absolute number of poor fell from 652 million to 135 million, a decline of over half a billion people. The most rapid declines in poverty, in both the poverty rate and the number of poor, occurred during the 6th, 8th, and 10th plans. During the 7th plan period the number of poor actually rose, while in the 9th plan period, the poverty rate declined only marginally. But the pace of poverty reduction resumed between 2001 and 2004 and there are indications that during the first couple of years of the 11th plan poverty has continued to decline rapidly. The most recent official estimate of rural poverty in China for 2007 puts the number of poor at 14.79 million, or less than 2 percent of the rural population. While there is no official urban poverty line, estimates by others have found poverty levels in urban areas to be negligible using an urban poverty line that is comparable to the official poverty line for rural areas. These estimates thus suggest that only about 1 percent of China's population is currently in extreme poverty. Notwithstanding this tremendous success, the central thesis of this report is that the task of poverty reduction in many ways continues and in some respects has become more demanding.Publication Kyrgyz Republic : Poverty Assessment, Volume 1. Growth, Employment and Poverty(Washington, DC, 2007-10-19)This report, which has been prepared by the World Bank in cooperation with the National Statistical Committee, provides an assessment of poverty in the Kyrgyz Republic using the most recent data available. The objective of this report is to understand to what extent economic growth has reduced poverty and led to improved living conditions for the population during 2000-2005. The report also attempts to answer three questions about the Kyrgyz Republic: what is the profile of poor? How has economic growth affected the level and composition of poverty? How has the labor market contributed to changes in poverty? The report is divided into two volumes. The first volume begins with this chapter which provides an international comparison of social and other key indicators of the Kyrgyz Republic followed by a profile of the poor based upon 2005 household survey data. The second chapter analyzes the linkages between growth and poverty during 2000-2005. The third chapter provides our key findings of labor market outcomes and poverty and what the implications are for policy making. The final chapter synthesizes the information from the earlier chapters and provides some policy directions. The second volume provides a more thorough analysis of labor markets. It covers developments in the labor market, urban labor markets, rural labor markets and differences between men and women in the labor market.Publication China - From Poor Areas to Poor People : China’s Evolving Poverty Reduction Agenda - An Assessment of Poverty and Inequality in China(World Bank, 2009-03-01)China's progress in poverty reduction over the last 25 years is enviable. One cannot fail to be impressed by what this vast nation of 1.3 billion people has achieved in so little time. In terms of a wide range of indicators, the progress has been remarkable. Poverty in terms of income and consumption has been dramatically reduced. Progress has also been substantial in terms of human development indicators. Most of the millennium development goals have either already been achieved or the country is well on the way to achieving them. As a result of this progress, the country is now at a very different stage of development than it was at the dawn of the economic reforms at the beginning of the 1980s. China's poverty reduction performance has been even more striking. Between 1981 and 2004, the fraction of the population consuming below this poverty line fell from 65 percent to 10 percent, and the absolute number of poor fell from 652 million to 135 million, a decline of over half a billion people. The most rapid declines in poverty, in both the poverty rate and the number of poor, occurred during the 6th, 8th, and 10th plans. During the 7th plan period the number of poor actually rose, while in the 9th plan period, the poverty rate declined only marginally. But the pace of poverty reduction resumed between 2001 and 2004 and there are indications that during the first couple of years of the 11th plan poverty has continued to decline rapidly. The most recent official estimate of rural poverty in China for 2007 puts the number of poor at 14.79 million, or less than 2 percent of the rural population. While there is no official urban poverty line, estimates by others have found poverty levels in urban areas to be negligible using an urban poverty line that is comparable to the official poverty line for rural areas. These estimates thus suggest that only about 1 percent of China's population is currently in extreme poverty. Notwithstanding this tremendous success, the central thesis of this report is that the task of poverty reduction in many ways continues and in some respects has become more demanding.Publication Bolivia : Poverty Diagnostic 2000(Washington, DC, 2002-06-28)The report presents a diagnostic of poverty, human development, and access to social infrastructure in Bolivia, based on analytical work, to serve as an input for the Poverty Reduction Strategy Paper (PRSP). Findings suggest that poverty affects half of the population in large cities, two thirds in other urban areas, and eighty percent in rural areas. Nonetheless, there is seemingly a recent decrease in inequality, although this does not imply a long-term trend. The complex determinants of poverty, are also increased by the fact of being from an indigenous population, and of having a household head unemployed, underemployed, and/or female. Since poverty decreases with education, and employment in non-agricultural occupations, and geography affects poverty, migration becomes a poverty-reducing tool. A qualitative study of farmers in the Altiplano suggest decreased rural productivity, intensified by climatic, demographic, and environmental pressures, with little gain from most development projects. Hence, progress in non-monetary indicators show that while unsatisfied basic needs fell significantly from 1976 to 2001, the gains were mainly achieved in urban areas, and needs remain large in rural areas. It is suggested that this progress in basic needs measures, lies in the increased social spending, but the scope for reducing monetary poverty, lies in the accessibility to public infrastructure services, in reducing violence, and gender issues. But the impact of growth needs further understanding, with improvements in productivity and competitiveness, enlarged by improvements in education, health, and nutrition, where the poor may benefit more than the non-poor from the expansion of these services.Publication From Farm to Firm : Rural-Urban Transition in Developing Countries(World Bank, 2011-05-26)Around the world, countries are becoming urbanized at an astonishing pace. As countries develop economically, their economies shift from mainly rural and agrarian to increasingly urban and nonagricultural. This rural-urban transformation presents both opportunities and challenges for development. When managed effectively, the transformation spurs growth and reduces poverty. When managed poorly, however, the process can result in stark welfare disparities, the marginalization of entire regions, and poorly functioning cities that fail to realize the potential gains from agglomeration economies. This book investigates the rural-urban transformation underway in Sub-Saharan Africa and South Asia, emphasizing the influence of country conditions as well as the potential of good policies to minimize disparities and ensure that everyone shares in the benefits of urbanization. The first part of this book investigates urbanization and rural-urban welfare inequalities on three geographic scales global, national, and local featuring countries and cities in Sub-Saharan Africa on the national and local levels. The second part of the book sheds light on the texture of transformation in five countries in South Asia, each at a different stage in the process: Bangladesh, India, Nepal, Pakistan, and Sri Lanka.
Users also downloaded
Showing related downloaded files
Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.Publication Breaking the Conflict Trap : Civil War and Development Policy(Washington, DC: World Bank and Oxford University Press, 2003)Most wars are now civil wars. Even though international wars attract enormous global attention, they have become infrequent and brief. Civil wars usually attract less attention, but they have become increasingly common and typically go on for years. This report argues that civil war is now an important issue for development. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap in which war wrecks the economy and increases the risk of further war. The global incidence of civil war is high because the international community has done little to avert it. Inertia is rooted in two beliefs: that we can safely 'let them fight it out among themselves' and that 'nothing can be done' because civil war is driven by ancestral ethnic and religious hatreds. The purpose of this report is to challenge these beliefs.