Did Higher Inequality Impede Growth in Rural China?

This paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural China. Using a rich longitudinal survey spanning the years 1987-2002, and controlling for an a...

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Main Authors:	Benjamin, Dwayne, Brandt, Loren, Giles, John
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCOUNTABILITY ADVERSE EFFECTS ADVERSE IMPACT AGRICULTURAL SECTOR ANNUAL GROWTH ANNUAL GROWTH RATE ASSET DISTRIBUTION AVERAGE ANNUAL AVERAGE GROWTH AVERAGE INCOMES BANK BIAS BIASES CAPITAL ACCUMULATION COLONIAL LAND CONSUMER PRICE INDEX CONSUMPTION CONSUMPTION GROWTH COOPERATIVES CORRUPTION CREDIT CREDIT MARKET CREDIT MARKET CONSTRAINTS CREDIT MARKETS CROSS-COUNTRY DATA CROSS-COUNTRY INEQUALITY DATA SET DATA SETS DEPENDENT VARIABLE DEVELOPMENT ECONOMICS DIFFERENTIAL PATHS DISTRIBUTION OF LAND DISTRIBUTIVE POLITICS DYNAMIC PANEL ECONOMETRIC ANALYSIS ECONOMETRIC ISSUES ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OPPORTUNITIES ECONOMIC OPPORTUNITY ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC STUDIES EDUCATIONAL ATTAINMENT EDUCATIONAL OPPORTUNITIES EMPIRICAL ANALYSIS EMPIRICAL PROBLEMS EMPIRICAL RESULTS EMPIRICAL WORK EMPLOYMENT GUARANTEE SCHEME EMPLOYMENT OPPORTUNITIES EMPOWERMENT ENDOWMENT ENDOWMENTS ENTERPRISES EQUAL OPPORTUNITY EXCLUSION EXPENDITURE EXPENDITURES EXPLANATORY VARIABLES FACTOR ENDOWMENTS FAMILY FAMILY BUSINESSES FARM ACTIVITY FARM EMPLOYMENT FARM EMPLOYMENT OPPORTUNITIES FARM OUTPUT FEE FEES FINANCIAL CRISIS FINANCIAL SUPPORT FOREIGN LANGUAGES FORMAL SOURCES OF CREDITS FUNCTIONAL FORM GINI COEFFICIENT GROUP MEANS GROWTH EQUATION GROWTH LITERATURE GROWTH RATE GROWTH RATES GROWTH THEORIES GROWTH-INEQUALITY RELATIONSHIP GUARANTEE GUARANTEE SCHEME HETEROGENEOUS COMMUNITIES HIGH INEQUALITY HIGHER INEQUALITY HOUSEHOLD HOUSEHOLD ACCESS HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD MEMBERS HOUSEHOLD PARTICIPATION HOUSEHOLD PER CAPITA INCOME HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLDS HUMAN CAPITAL HUMAN DEVELOPMENT IMPACT OF INEQUALITY IMPERFECT CREDIT INCOME DISTRIBUTION INCOME GROWTH INCOME INEQUALITY INCOME VARIABLES INDICATORS INEQUALITY INEQUALITY INDEX INEQUALITY MEASURE INEQUALITY MEASURES INEQUALITY-GROWTH RELATIONSHIP INSTRUMENTS INTEREST INTERNATIONAL BANK INVESTMENT JOB OPPORTUNITIES LABOR MARKETS LABOUR MARKETS LAND DISTRIBUTION LAND REFORM LINK BETWEEN INEQUALITY AND GROWTH LOG INCOME MACROECONOMIC IMPLICATIONS MACROECONOMICS MARKET CONSTRAINTS MARKET DEVELOPMENT MEAN INCOME MEAN INCOMES MEAN LOG DEVIATION MEASUREMENT ERROR MEASUREMENT PROBLEMS MEASURES OF POVERTY NEGATIVE EFFECT NEGATIVE GROWTH NEGATIVE RELATIONSHIP NET INCOME NEW MARKETS 0 HYPOTHESIS OUTCOMES PEOPLE PER CAPITA INCOME PER CAPITA INCOMES PHYSICAL CAPITAL POLICIES POLICY RESEARCH POLITICAL ECONOMY POLITICAL ECONOMY MODELS POLITICAL PARTICIPATION POOR POOR HOUSEHOLDS POST-REFORM POVERTY POVERTY DYNAMICS POVERTY REDUCTION PRIMARY EDUCATION PRODUCT PRODUCTIVITY GROWTH PROGRAMS PROPERTY PROPERTY RIGHTS PUBLIC ECONOMICS PUBLIC EDUCATION PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC GOODS PUBLIC INVESTMENTS PUBLIC POLICY REGRESSION RESULTS REVENUE RISING INEQUALITY RURAL RURAL CONSUMER RURAL ECONOMY RURAL EMPLOYMENT RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL INEQUALITY RURAL PUBLIC SAMPLING SCHOOL FINANCE SIGNIFICANT DIFFERENCES SIGNIFICANT EFFECT SIGNIFICANT NEGATIVE SMALL BUSINESSES SOURCES OF INCOME SURVEY DESIGN TARGETING TAXATION TRANSFERS VILLAGE VILLAGE LEADERS VILLAGES WAGES
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101119093018 http://hdl.handle.net/10986/3964

id	okr-10986-3964
recordtype	oai_dc
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTABILITY ADVERSE EFFECTS ADVERSE IMPACT AGRICULTURAL SECTOR ANNUAL GROWTH ANNUAL GROWTH RATE ASSET DISTRIBUTION AVERAGE ANNUAL AVERAGE GROWTH AVERAGE INCOMES BANK BIAS BIASES CAPITAL ACCUMULATION COLONIAL LAND CONSUMER PRICE INDEX CONSUMPTION CONSUMPTION GROWTH COOPERATIVES CORRUPTION CREDIT CREDIT MARKET CREDIT MARKET CONSTRAINTS CREDIT MARKETS CROSS-COUNTRY DATA CROSS-COUNTRY INEQUALITY DATA SET DATA SETS DEPENDENT VARIABLE DEVELOPMENT ECONOMICS DIFFERENTIAL PATHS DISTRIBUTION OF LAND DISTRIBUTIVE POLITICS DYNAMIC PANEL ECONOMETRIC ANALYSIS ECONOMETRIC ISSUES ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OPPORTUNITIES ECONOMIC OPPORTUNITY ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC STUDIES EDUCATIONAL ATTAINMENT EDUCATIONAL OPPORTUNITIES EMPIRICAL ANALYSIS EMPIRICAL PROBLEMS EMPIRICAL RESULTS EMPIRICAL WORK EMPLOYMENT GUARANTEE SCHEME EMPLOYMENT OPPORTUNITIES EMPOWERMENT ENDOWMENT ENDOWMENTS ENTERPRISES EQUAL OPPORTUNITY EXCLUSION EXPENDITURE EXPENDITURES EXPLANATORY VARIABLES FACTOR ENDOWMENTS FAMILY FAMILY BUSINESSES FARM ACTIVITY FARM EMPLOYMENT FARM EMPLOYMENT OPPORTUNITIES FARM OUTPUT FEE FEES FINANCIAL CRISIS FINANCIAL SUPPORT FOREIGN LANGUAGES FORMAL SOURCES OF CREDITS FUNCTIONAL FORM GINI COEFFICIENT GROUP MEANS GROWTH EQUATION GROWTH LITERATURE GROWTH RATE GROWTH RATES GROWTH THEORIES GROWTH-INEQUALITY RELATIONSHIP GUARANTEE GUARANTEE SCHEME HETEROGENEOUS COMMUNITIES HIGH INEQUALITY HIGHER INEQUALITY HOUSEHOLD HOUSEHOLD ACCESS HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD MEMBERS HOUSEHOLD PARTICIPATION HOUSEHOLD PER CAPITA INCOME HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLDS HUMAN CAPITAL HUMAN DEVELOPMENT IMPACT OF INEQUALITY IMPERFECT CREDIT INCOME DISTRIBUTION INCOME GROWTH INCOME INEQUALITY INCOME VARIABLES INDICATORS INEQUALITY INEQUALITY INDEX INEQUALITY MEASURE INEQUALITY MEASURES INEQUALITY-GROWTH RELATIONSHIP INSTRUMENTS INTEREST INTERNATIONAL BANK INVESTMENT JOB OPPORTUNITIES LABOR MARKETS LABOUR MARKETS LAND DISTRIBUTION LAND REFORM LINK BETWEEN INEQUALITY AND GROWTH LOG INCOME MACROECONOMIC IMPLICATIONS MACROECONOMICS MARKET CONSTRAINTS MARKET DEVELOPMENT MEAN INCOME MEAN INCOMES MEAN LOG DEVIATION MEASUREMENT ERROR MEASUREMENT PROBLEMS MEASURES OF POVERTY NEGATIVE EFFECT NEGATIVE GROWTH NEGATIVE RELATIONSHIP NET INCOME NEW MARKETS 0 HYPOTHESIS OUTCOMES PEOPLE PER CAPITA INCOME PER CAPITA INCOMES PHYSICAL CAPITAL POLICIES POLICY RESEARCH POLITICAL ECONOMY POLITICAL ECONOMY MODELS POLITICAL PARTICIPATION POOR POOR HOUSEHOLDS POST-REFORM POVERTY POVERTY DYNAMICS POVERTY REDUCTION PRIMARY EDUCATION PRODUCT PRODUCTIVITY GROWTH PROGRAMS PROPERTY PROPERTY RIGHTS PUBLIC ECONOMICS PUBLIC EDUCATION PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC GOODS PUBLIC INVESTMENTS PUBLIC POLICY REGRESSION RESULTS REVENUE RISING INEQUALITY RURAL RURAL CONSUMER RURAL ECONOMY RURAL EMPLOYMENT RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL INEQUALITY RURAL PUBLIC SAMPLING SCHOOL FINANCE SIGNIFICANT DIFFERENCES SIGNIFICANT EFFECT SIGNIFICANT NEGATIVE SMALL BUSINESSES SOURCES OF INCOME SURVEY DESIGN TARGETING TAXATION TRANSFERS VILLAGE VILLAGE LEADERS VILLAGES WAGES
spellingShingle	ACCOUNTABILITY ADVERSE EFFECTS ADVERSE IMPACT AGRICULTURAL SECTOR ANNUAL GROWTH ANNUAL GROWTH RATE ASSET DISTRIBUTION AVERAGE ANNUAL AVERAGE GROWTH AVERAGE INCOMES BANK BIAS BIASES CAPITAL ACCUMULATION COLONIAL LAND CONSUMER PRICE INDEX CONSUMPTION CONSUMPTION GROWTH COOPERATIVES CORRUPTION CREDIT CREDIT MARKET CREDIT MARKET CONSTRAINTS CREDIT MARKETS CROSS-COUNTRY DATA CROSS-COUNTRY INEQUALITY DATA SET DATA SETS DEPENDENT VARIABLE DEVELOPMENT ECONOMICS DIFFERENTIAL PATHS DISTRIBUTION OF LAND DISTRIBUTIVE POLITICS DYNAMIC PANEL ECONOMETRIC ANALYSIS ECONOMETRIC ISSUES ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OPPORTUNITIES ECONOMIC OPPORTUNITY ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC STUDIES EDUCATIONAL ATTAINMENT EDUCATIONAL OPPORTUNITIES EMPIRICAL ANALYSIS EMPIRICAL PROBLEMS EMPIRICAL RESULTS EMPIRICAL WORK EMPLOYMENT GUARANTEE SCHEME EMPLOYMENT OPPORTUNITIES EMPOWERMENT ENDOWMENT ENDOWMENTS ENTERPRISES EQUAL OPPORTUNITY EXCLUSION EXPENDITURE EXPENDITURES EXPLANATORY VARIABLES FACTOR ENDOWMENTS FAMILY FAMILY BUSINESSES FARM ACTIVITY FARM EMPLOYMENT FARM EMPLOYMENT OPPORTUNITIES FARM OUTPUT FEE FEES FINANCIAL CRISIS FINANCIAL SUPPORT FOREIGN LANGUAGES FORMAL SOURCES OF CREDITS FUNCTIONAL FORM GINI COEFFICIENT GROUP MEANS GROWTH EQUATION GROWTH LITERATURE GROWTH RATE GROWTH RATES GROWTH THEORIES GROWTH-INEQUALITY RELATIONSHIP GUARANTEE GUARANTEE SCHEME HETEROGENEOUS COMMUNITIES HIGH INEQUALITY HIGHER INEQUALITY HOUSEHOLD HOUSEHOLD ACCESS HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD MEMBERS HOUSEHOLD PARTICIPATION HOUSEHOLD PER CAPITA INCOME HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLDS HUMAN CAPITAL HUMAN DEVELOPMENT IMPACT OF INEQUALITY IMPERFECT CREDIT INCOME DISTRIBUTION INCOME GROWTH INCOME INEQUALITY INCOME VARIABLES INDICATORS INEQUALITY INEQUALITY INDEX INEQUALITY MEASURE INEQUALITY MEASURES INEQUALITY-GROWTH RELATIONSHIP INSTRUMENTS INTEREST INTERNATIONAL BANK INVESTMENT JOB OPPORTUNITIES LABOR MARKETS LABOUR MARKETS LAND DISTRIBUTION LAND REFORM LINK BETWEEN INEQUALITY AND GROWTH LOG INCOME MACROECONOMIC IMPLICATIONS MACROECONOMICS MARKET CONSTRAINTS MARKET DEVELOPMENT MEAN INCOME MEAN INCOMES MEAN LOG DEVIATION MEASUREMENT ERROR MEASUREMENT PROBLEMS MEASURES OF POVERTY NEGATIVE EFFECT NEGATIVE GROWTH NEGATIVE RELATIONSHIP NET INCOME NEW MARKETS 0 HYPOTHESIS OUTCOMES PEOPLE PER CAPITA INCOME PER CAPITA INCOMES PHYSICAL CAPITAL POLICIES POLICY RESEARCH POLITICAL ECONOMY POLITICAL ECONOMY MODELS POLITICAL PARTICIPATION POOR POOR HOUSEHOLDS POST-REFORM POVERTY POVERTY DYNAMICS POVERTY REDUCTION PRIMARY EDUCATION PRODUCT PRODUCTIVITY GROWTH PROGRAMS PROPERTY PROPERTY RIGHTS PUBLIC ECONOMICS PUBLIC EDUCATION PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC GOODS PUBLIC INVESTMENTS PUBLIC POLICY REGRESSION RESULTS REVENUE RISING INEQUALITY RURAL RURAL CONSUMER RURAL ECONOMY RURAL EMPLOYMENT RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL INEQUALITY RURAL PUBLIC SAMPLING SCHOOL FINANCE SIGNIFICANT DIFFERENCES SIGNIFICANT EFFECT SIGNIFICANT NEGATIVE SMALL BUSINESSES SOURCES OF INCOME SURVEY DESIGN TARGETING TAXATION TRANSFERS VILLAGE VILLAGE LEADERS VILLAGES WAGES Benjamin, Dwayne Brandt, Loren Giles, John Did Higher Inequality Impede Growth in Rural China?
geographic_facet	East Asia and Pacific East Asia and Pacific East Asia Asia China
relation	Policy Research working paper ; no. WPS 5483
description	This paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural China. Using a rich longitudinal survey spanning the years 1987-2002, and controlling for an array of household and village characteristics, the paper finds that households located in higher inequality villages experienced significantly lower income growth through the 1990s. However, local inequality s predictive power and effects are significantly diminished by the end of the sample. The paper exploits several advantages of the household-level data to explore hypotheses that shed light on the channels by which inequality affects growth. Biases due to aggregation and heterogeneity of returns to own-resources, previously suggested as candidate explanations for the relationship, are both ruled out. Instead, the evidence points to unobserved village institutions at the time of economic reforms that were associated with household access to higher income activities as the source of the link between inequality and growth. The empirical analysis addresses a number of pertinent econometric issues including measurement error and attrition, but underscores others that are likely to be intractable for all investigations of the inequality-growth relationship.
format	Publications & Research :: Policy Research Working Paper
author	Benjamin, Dwayne Brandt, Loren Giles, John
author_facet	Benjamin, Dwayne Brandt, Loren Giles, John
author_sort	Benjamin, Dwayne
title	Did Higher Inequality Impede Growth in Rural China?
title_short	Did Higher Inequality Impede Growth in Rural China?
title_full	Did Higher Inequality Impede Growth in Rural China?
title_fullStr	Did Higher Inequality Impede Growth in Rural China?
title_full_unstemmed	Did Higher Inequality Impede Growth in Rural China?
title_sort	did higher inequality impede growth in rural china?
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101119093018 http://hdl.handle.net/10986/3964
_version_	1764389245004283904
spelling	okr-10986-39642021-04-23T14:02:14Z Did Higher Inequality Impede Growth in Rural China? Benjamin, Dwayne Brandt, Loren Giles, John ACCOUNTABILITY ADVERSE EFFECTS ADVERSE IMPACT AGRICULTURAL SECTOR ANNUAL GROWTH ANNUAL GROWTH RATE ASSET DISTRIBUTION AVERAGE ANNUAL AVERAGE GROWTH AVERAGE INCOMES BANK BIAS BIASES CAPITAL ACCUMULATION COLONIAL LAND CONSUMER PRICE INDEX CONSUMPTION CONSUMPTION GROWTH COOPERATIVES CORRUPTION CREDIT CREDIT MARKET CREDIT MARKET CONSTRAINTS CREDIT MARKETS CROSS-COUNTRY DATA CROSS-COUNTRY INEQUALITY DATA SET DATA SETS DEPENDENT VARIABLE DEVELOPMENT ECONOMICS DIFFERENTIAL PATHS DISTRIBUTION OF LAND DISTRIBUTIVE POLITICS DYNAMIC PANEL ECONOMETRIC ANALYSIS ECONOMETRIC ISSUES ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC OPPORTUNITIES ECONOMIC OPPORTUNITY ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC REVIEW ECONOMIC SHOCKS ECONOMIC STUDIES EDUCATIONAL ATTAINMENT EDUCATIONAL OPPORTUNITIES EMPIRICAL ANALYSIS EMPIRICAL PROBLEMS EMPIRICAL RESULTS EMPIRICAL WORK EMPLOYMENT GUARANTEE SCHEME EMPLOYMENT OPPORTUNITIES EMPOWERMENT ENDOWMENT ENDOWMENTS ENTERPRISES EQUAL OPPORTUNITY EXCLUSION EXPENDITURE EXPENDITURES EXPLANATORY VARIABLES FACTOR ENDOWMENTS FAMILY FAMILY BUSINESSES FARM ACTIVITY FARM EMPLOYMENT FARM EMPLOYMENT OPPORTUNITIES FARM OUTPUT FEE FEES FINANCIAL CRISIS FINANCIAL SUPPORT FOREIGN LANGUAGES FORMAL SOURCES OF CREDITS FUNCTIONAL FORM GINI COEFFICIENT GROUP MEANS GROWTH EQUATION GROWTH LITERATURE GROWTH RATE GROWTH RATES GROWTH THEORIES GROWTH-INEQUALITY RELATIONSHIP GUARANTEE GUARANTEE SCHEME HETEROGENEOUS COMMUNITIES HIGH INEQUALITY HIGHER INEQUALITY HOUSEHOLD HOUSEHOLD ACCESS HOUSEHOLD CONSUMPTION HOUSEHOLD HEAD HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD MEMBERS HOUSEHOLD PARTICIPATION HOUSEHOLD PER CAPITA INCOME HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLDS HUMAN CAPITAL HUMAN DEVELOPMENT IMPACT OF INEQUALITY IMPERFECT CREDIT INCOME DISTRIBUTION INCOME GROWTH INCOME INEQUALITY INCOME VARIABLES INDICATORS INEQUALITY INEQUALITY INDEX INEQUALITY MEASURE INEQUALITY MEASURES INEQUALITY-GROWTH RELATIONSHIP INSTRUMENTS INTEREST INTERNATIONAL BANK INVESTMENT JOB OPPORTUNITIES LABOR MARKETS LABOUR MARKETS LAND DISTRIBUTION LAND REFORM LINK BETWEEN INEQUALITY AND GROWTH LOG INCOME MACROECONOMIC IMPLICATIONS MACROECONOMICS MARKET CONSTRAINTS MARKET DEVELOPMENT MEAN INCOME MEAN INCOMES MEAN LOG DEVIATION MEASUREMENT ERROR MEASUREMENT PROBLEMS MEASURES OF POVERTY NEGATIVE EFFECT NEGATIVE GROWTH NEGATIVE RELATIONSHIP NET INCOME NEW MARKETS 0 HYPOTHESIS OUTCOMES PEOPLE PER CAPITA INCOME PER CAPITA INCOMES PHYSICAL CAPITAL POLICIES POLICY RESEARCH POLITICAL ECONOMY POLITICAL ECONOMY MODELS POLITICAL PARTICIPATION POOR POOR HOUSEHOLDS POST-REFORM POVERTY POVERTY DYNAMICS POVERTY REDUCTION PRIMARY EDUCATION PRODUCT PRODUCTIVITY GROWTH PROGRAMS PROPERTY PROPERTY RIGHTS PUBLIC ECONOMICS PUBLIC EDUCATION PUBLIC EXPENDITURE PUBLIC EXPENDITURES PUBLIC FINANCE PUBLIC GOODS PUBLIC INVESTMENTS PUBLIC POLICY REGRESSION RESULTS REVENUE RISING INEQUALITY RURAL RURAL CONSUMER RURAL ECONOMY RURAL EMPLOYMENT RURAL HOUSEHOLD RURAL HOUSEHOLDS RURAL INEQUALITY RURAL PUBLIC SAMPLING SCHOOL FINANCE SIGNIFICANT DIFFERENCES SIGNIFICANT EFFECT SIGNIFICANT NEGATIVE SMALL BUSINESSES SOURCES OF INCOME SURVEY DESIGN TARGETING TAXATION TRANSFERS VILLAGE VILLAGE LEADERS VILLAGES WAGES This paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural China. Using a rich longitudinal survey spanning the years 1987-2002, and controlling for an array of household and village characteristics, the paper finds that households located in higher inequality villages experienced significantly lower income growth through the 1990s. However, local inequality s predictive power and effects are significantly diminished by the end of the sample. The paper exploits several advantages of the household-level data to explore hypotheses that shed light on the channels by which inequality affects growth. Biases due to aggregation and heterogeneity of returns to own-resources, previously suggested as candidate explanations for the relationship, are both ruled out. Instead, the evidence points to unobserved village institutions at the time of economic reforms that were associated with household access to higher income activities as the source of the link between inequality and growth. The empirical analysis addresses a number of pertinent econometric issues including measurement error and attrition, but underscores others that are likely to be intractable for all investigations of the inequality-growth relationship. 2012-03-19T18:42:58Z 2012-03-19T18:42:58Z 2010-11-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101119093018 http://hdl.handle.net/10986/3964 English Policy Research working paper ; no. WPS 5483 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper East Asia and Pacific East Asia and Pacific East Asia Asia China

Did Higher Inequality Impede Growth in Rural China?

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