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Economic Inequality in Asia

Paper Session

Saturday, Jan. 4, 2020 2:30 PM - 4:30 PM (PST)

Manchester Grand Hyatt, Cove
Hosted By: American Committee on Asian Economic Studies
  • Chair: Calla Wiemer, American Committee on Asian Economic Studies

Inequality in China: Development, Transition, and Policy

Shi Li
,
Zhejiang University
Terry Sicular
,
University of Western Ontario
Finn Tarp
,
University of Copenhagen

Abstract

The evolution of income inequality in China over the past 40 years is the net result of four interleaved stories. The first story is a standard development story characterized by structural change, growing market integration, and labor absorption, which together are associated with a Kuznets inverted-U path of inequality. The second is the economic transition story, in which the shift from a planned to a market economy generates increased differentiation of incomes. Third is the story of incomplete transition, which generates opportunities for rent seeking, corruption, and hidden income. with obvious implications for inequality. Fourth is the story of government efforts to moderate inequality, which efforts have expanded over time and led to the establishment of a range of new social and welfare programs. We discuss in turn each of these stories and their relationship to the evolution of China’s income inequality.

International Trade and Income Distribution: Evidence from China

Oliver Holtemöller
,
Halle Institute for Economic Research (IWH)
Yanqun Zhang
,
Chinese Academy of Social Sciences

Abstract

We explore the development of labor's share in income and wage inequality in China since 1999 and estimate the effect of international trade on income distributions on a regional level. Two major shocks have driven Chinese exports after 1999. The first event is China's entry into the World Trade Organization and the second one is the collapse of world trade during the worldwide financial crises. Firstly, we document on the provinces level that export activities and labor's share of income are negatively correlated. Using changes in exports in other provinces as instrument, we show that increasing exports reduce the labor share. Secondly, we use data for prefecture-level cities and consider WTO entry and worldwide financial crises to be exogenous with respect to wage development in the individual cities. We control for individual worker characteristics using several waves of Chinese household survey data (CHIP). We find that more international trade is associated with higher wage inequality.

Trade Liberalization and Income Inequality: The Case of Pakistan

Muhammad Aamir Khan
,
COMSATS University
Terrie Walmsley
,
ImpactECON LLC
Kakali Mukhopadhyay
,
McGill University

Abstract

Trade liberalization policies have been adopted by many developing countries to increase economic growth and reduce poverty. While the positive relationship between trade liberalization and economic growth is generally well accepted, the impact of trade liberalization on poverty and income inequality is still unclear. The objective of this paper is to examine the impact of trade liberalization on income inequality using a global trade model adapted to examine the impacts on multiple households. To illustrate, we simulate the impact of several alternative bilateral and regional free trade agreements on household income and income inequality in Pakistan. The results suggest that trade liberalization does not always lead to a decline in income inequality. Moreover, a focus on reducing income inequality in the short run through trade liberalization, may not necessarily lead to the best long run outcome, for the country or for income equality.
Discussant(s)
Barry Naughton
,
University of California-San Diego
Fan Liu
,
Xi'an Jiaotong-Liverpool University
Tomoo Kikuchi
,
Korea University
JEL Classifications
  • D3 - Distribution
  • O5 - Economywide Country Studies