THE DISTRIBUTION OF INCOME IN CHINA

THE DISTRIBUTION OF INCOME IN CHINA

The Distribution of Income in China Edited by Keith Griffin Professor and Chair Department of Economics University of California, Riverside and Zhao Renwei Professor and Chair Academic Committee of the Institute of Economics Chinese Academy of Social Sciences, Beijing!50th YEAR M St. Martin's Press

Keith Griffin and Zhao Renwei 1993 Softcover reprint of the hardcover 1st edition 1993 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1993 by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN 978-1-349-23028-0 ISBN 978-1-349-23026-6 ( ebook) DOI 10.1007/978-1-349-23026-6 First published in the United States of America 1993 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y. 10010 ISBN 978-0-312-10022-3 Library of Congress Cataloging-in-Publication Data The Distribution of income in China I edited by Keith Griffin and Zhao Renwei. p. em. Includes index. ISBN 978-0-312-10022-3 I. Income distribution-china. 2. Household surveys-china. I. Griffin, Keith B. II. Zhao, Renwei. HC430.15D57 1993 339.2'0951---dc20 93-7939 CIP

Contents Preface Notes on the Contributors Vll X Introduction Keith Griffin and Zhao Renwei Part I The Distribution of Income Household Income and its Distribution in China 25 Azizur Rahman Khan, Keith Griffin, Carl Riskin and Zhao Renwei 2 Three Features of the Distribution of Income during the Transition to Reform 74 Zhao Renwei Part II Income and Wealth in Rural China 3 The Determinants of Household Income in Rural China 95 Azizur Rahman Khan 4 The Distribution of Wealth in Rural China 116 Terry McKinley 5 Income Distribution and Poverty in Rural China Carl Riskin 135 Part Ill Employment and Human Capital 6 Workers in China's Rural Industries John Knight and Song Lina 7 Why Urban Wages Differ in China John Knight and Song Lina 173 216 v

vi Contents 8 The Determinants of Educational Attainment John Knight and Li Shi Annex: The 1988 Household Sample Survey - Data Description and Availability Marc Eichen and Zhang Ming Index 285 331 347

Preface This volume includes some of the initial results of a research programme on the distribution of income in China. The programme was conceived in 1988 and implemented under the joint direction of Zhao Renwei and Keith Griffin. The Institute of Economics of the Chinese Academy of Social Sciences provided institutional support and covered most local costs. Grants from the Ford Foundation covered the external costs and some local expenditure. We are particularly indebted to Peter Geithner, the Ford Foundation's representative in Beijing at the time the programme was launched, for his encouragement, unfailing assistance and strong support. His successor, Peter Harris, was equally supportive and we are equally indebted to him. This volume is but one of the products of a collaborative effort that included economists, statisticians and computer specialists from China, the United States and the United Kingdom. Our original intentions were, first, to undertake a major programme of research on inequality in China, an issue of applied economics that attracted growing attention as the economic reforms proceeded; second, to train a group of young Chinese economists in Western methods of empirical research and; third, to provide Chinese economists with opportunities for professional development by establishing contacts with other scholars abroad working on similar issues. Looking back over four years we can say that our hopes have not been disappointed. The research programme itself turned out to be one of the largest social science research projects ever undertaken in China. The project took longer than expected and we are grateful to the Ford Foundation for its admirable patience and understanding of our difficulties. The papers in this volume contain results of interest to an international audience. Other papers, perhaps of more restricted interest, will be published in Chinese only. Still other papers, yet to be written, will appear from time to time as members of the research team continue to exploit the data generated for this project in their future writing and research. Scholars not associated with the original research programme can obtain the data set and code books through the Inter-university Consortium for Political and Social Research of the University of Michigan. vii

viii Preface The training component of the overall programme was effected in a variety of ways: through short courses in Beijing and New York, formal academic instruction at the University of Michigan, joint research and authorship of papers and a workshop in Xian, all financed by the Ford Foundation. We would like to single out for special thanks Jeffrey Zax and Marc Eichen for the parts they played in organizing training in econometrics and computer sciences, respectively. Three short visits were arranged to South and Southeast Asia, Scandinavia and the United States and Canada. The purposes of these trips were to expose Chinese scholars to distributional problems in a number of foreign countries where market forces largely determine the allocation of resources, to enable them to learn a bit about how public policy in other countries has addressed issues of poverty and inequality and to make it possible for Chinese scholars to meet people abroad whose research interests are similar to their own. Albert Berry was very helpful in organizing the visit to Canada and we are very grateful to him. We would also like to express our thanks to the World Institute of Development Economics Research in Helsinki, the University of Stockholm and the National Institute for Rural Development in India for making possible the visits to Finland, Sweden and India, respectively. Carl Riskin and Aziz Khan were deeply involved in the project from the beginning and deserve credit for much of the success. They were especially helpful in designing the questionnaire, recruiting members of the research team and developing the concept of income used in the research. Leslie Kish provided valuable advice on statistical issues in the early stages of the project and Laurie Baumann helped with the survey design. Jeffrey Zax provided enormous help with the data gathering, methodological and econometric aspects of the project. Li Shi took responsibility for questionnaire design and distribution and he and Zhu Ling were deeply involved in overall project management. Zou Yishang and Zhang Ming took charge of organizing the data coding team. Many people in the data gathering and daht coding teams performed beyond the call of duty during difficult times: had it not been for them, the data set would not exist. Lee Travers, while he was an economist in the Ford Foundation office in Beijing and later, helped to solve some of our logistical problems and contributed in many ways to our academic endeavours. The University of California, Riverside; the East Asian Institute, Columbia University; the City University of New York; and the Leverhulme Trust in Great Britain provided

Preface ix financial and administrative support. We thank all these persons and institutions, and many others named in the notes accompanying each chapter, for their valuable assistance. KEITH GRIFFIN ZHAO RENWEI

Notes on the Contributors Marc Eichen is Director of Academic Computing Services, Hunter College of the City University of New York. Trained as a geographer, Dr Eichen is particularly interested in spatial analysis and computer simulation. In addition to his research in China, he has lectured and conducted research in Egypt and Jamaica. Keith Griffin is a Professor and Chairman of the Economics Department at the University of California, Riverside. He was formerly President of Magdalen College, Oxford. He has served as adviser and consultant to various governments, international agencies and academic institutions in Asia, Latin America and Africa. He is the author of several books, including Alternative Strategies for Economic Development and The Political Economy of Agrarian Change and editor of Institutional Reform and Economic Development in the Chinese Countryside. Azizur Rahman Khan is Professor of Economics at the University of California, Riverside. His previous positions include Research Director at the Pakistan Institute of Development Economics and at the Bangladesh Institute of Development Studies, Lecturer at the London School of Economics, Director of the Asian Employment Programme of the ILO and Senior Economist at the World Bank. He is the author of The Economy of Bangladesh, co-author of Collective Agriculture and Rural Development in Soviet Central Asia and The Strategy of Development in Bangladesh and co-editor of Poverty and Landlessness in Rural Asia and Agrarian Systems and Rural Development. John Knight is Senior Research Officer at the Institute of Economics and Statistics and Fellow of St Edmund Hall, University of Oxford. His research is mainly on labour markets and income distribution in developing countries. Among his recent publications is Education, Productivity and Inequality: the East African Natural Experiment. He and Song Lina are developing a programme of research on the Chinese economy. X

Notes on the Contributors xi Li Shi is an Associate Professor in the Institute of Economics, Chinese Academy of Social Sciences. He did postgraduate work at Beijing University and has been a visiting scholar at the Centre for Development Planning, Erasmus University, Rotterdam, at Columbia University, New York, and recently at the Institute of Economics and Statistics, Oxford University, where his collaborative contribution to this volume was produced. Terry McKinley is Assistant Professor, School of International Service, American University, Washington, DC. His major area of research has been the distribution of wealth in rural China. In addition he has published papers on trade and industrialization in Latin America. He is currently doing research on various aspects of human development. Carl Riskin is Professor of Economics at Queens College and the CUNY Graduate Center, and Senior Research Scholar at the East Asian Institute, Columbia University. He is the author of China's Political Economy and of several studies of economic development strategies in China. Song Lina is Research Officer at the Institute of Economics and Statistics, University of Oxford, where she is conducting research on the Chinese economy. Her recent publications include two contributions to William Byrd and Lin Qingsong, (eds), China's Rural Industry: Structure, Development and Reform. Zhang Ming is an engineer at the Institute of Economics, Chinese Academy of Social Sciences. His particular expertise includes computer applications, data processing and handling of very large data sets and statistical analysis in the social sciences, with special emphasis on economics and econometrics. Zhao Renwei is Professor (research fellow) and Chairman of the Academic Committee of the Institute of Economics of the Chinese Academy of Social Sciences. He graduated from the Department of Economics, Beijing University in 1957 and was a Visiting Fellow of St Antony's College, Oxford in 1982-3. He has specialized in the theory of socialist economics and in comparative economic management systems. He was twice a winner, in 1984 and 1986, of one of the Sun Yehfang Awards for economic research.