Upload
hang
View
31
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Does Class Count? Class Structure and Worsening Inequality in China and India. Presentation for Development Workshop Ichiro Uehara & Emanuel Ules. Outline. Introduction Description of Class Structure Data Results Policy Suggestions Criticism Other literature Discussion. Introduction. - PowerPoint PPT Presentation
Citation preview
Presentation for Development WorkshopIchiro Uehara & Emanuel Ules
Development Workshop - Inequality in India and China1
Does Class Count? Class Structure and Worsening
Inequality in China and India
Outline
Development Workshop - Inequality in India and China2
IntroductionDescription of Class StructureDataResultsPolicy SuggestionsCriticismOther literatureDiscussion
Introduction
Development Workshop - Inequality in India and China3
According to the New York Times…In Aurangabad, India, more than 150 businessmen
bought a Mercedes each; spent nearly $15 million in a single day to stimulate investment in Aurangabad
Aurangabad is not known so they needed to show that they have money
Antipoverty activist says…The money spent for the luxury cars could have gone to
help those left behind by Aurangabad’s boom
Introduction
Development Workshop - Inequality in India and China4
Two countries with more than 2,5 billion inhabitants
Income/capita India: 1,000 $Income/capita China: 3,315 $High growth rates + high inequalityQuestion: what are the sources of inequality? (in
terms of class structure)
Class?
Development Workshop - Inequality in India and China5
Income termsEconomicPoliticalConsciousnessMarxists
WorkersOthers who appropriate workers and live off the
surplus(moneylenders, merchants, landlords, shareholders, managers, and state)
Classes
Development Workshop - Inequality in India and China6
Authors used 2 class schemas…First (simplified),
Elites and workersAgricultural and non-agriculturalUrban and rural
Classes
Development Workshop - Inequality in India and China7
Second (detailed),Urban and ruralSkilled and unskilled
Skilled: skilled and professionalManufacturing and servicesOwners and managersFormal and informal sectorLanded and landless
Landed: rich, middle, small and marginal/tenantMoneylenders and absentee and landlordNon-agricultural self-employed
Indian Data
Development Workshop - Inequality in India and China8
The Indian National Sample Survey, Household Consumer Expenditure DataPeriods of
1993-94 (115,354 samples)2004-05 (124,643 sample)
Monthly per capita expenditure levelAdjusted to annual figuresAdjusted to 2005 PPP US dollar
Chinese Data
Development Workshop - Inequality in India and China9
1995, 11 provinces with 6931 households in urban areas, 19 provinces with 7988 households in rural areas were selected
in 2002, 12 provinces with 6835 households in urban areas, 22 provinces with 9194 households in rural areas were selected.
Classes were defined using the CHIP survey based questions on the occupations of the members of the household.
Data Limitations and Bias upper end consumption groups are not adequately sampled
managers and owners underrepresented migrants from rural areas to urban areas are not listed as urban
residents
Farmers in India
Development Workshop - Inequality in India and China10
Rich farmers: own more than 10 acres of landMiddle: own between 5 and 10 acresSmall: own between 2 and 5 acresMarginal: own less than 2 acres
Simplified Class Structure India
Development Workshop - Inequality in India and China11
Urban classes are better off than their rural counterparts
Biggest gainers are the urban elitesModerate gainers are the rural elite and non-
agricultural workersBiggest losers are the urban working class
Simplified Class Structure in India
Development Workshop - Inequality in India and China12
Decomposition: Urban-Rural in India
Development Workshop - Inequality in India and China13
Overall inequality can be explained by INTRA-group component (more than 80%)
There is proportional increase in INTER-group inequality as well as URBAN areasINTRA-URBAN inequality
Decomposition: Urban-Rural in India
Development Workshop - Inequality in India and China14
Decomposition:Simplified class in India
Development Workshop - Inequality in India and China15
INTRA-group inequality explains overall inequalityRISE in URBAN elite and Non-agricultural workers
INTER-group inequality increased significantly
Decomposition:Simplified class in India
Development Workshop - Inequality in India and China16
Inequality in India
Development Workshop - Inequality in India and China17
Indian inequality between 1993-1994 and 2004-2005 is explained by the RISE of inequality BETWEEN classes.But overall inequality can be explained by WITHIN classesIncrease distance between elite classes and the bottom
classesInequality stagnated (or mildly declined) in the
1980s Increased in the 1990s
Gini Coefficient between 1993-94 and 2004-05 increased almost 4 points
Simplified Class Structure China
Development Workshop - Inequality in India and China18
Urban classes are the most well offDecline in in ratio of mean of class consumption to
mean overall consumption due to migration“administrative urbanization”
villages in suburban areas become part of the citiesBureaucratic process, but rural areas are suddenly part of
urban areas economic structure is of course not changed
Turns richest former rural farmers into relatively poor urban members
“artificial migration”
Simplified Class Structure China cont.
Development Workshop - Inequality in India and China19
Decomposition Results China (detailed)
Development Workshop - Inequality in India and China20
Urban areas:Winners: owners, managers and skilled workers in service
sectorLosers: unskilled workers in services as well as unskilled
(!) and skilled workers in manufacturing (!!!)
Rural areas:Winners: workers in formal sector and owners in informal
sectorLosers: unskilled workers in formal and workers in informal
sector
Decomposing Chinese Inequality
Development Workshop - Inequality in India and China21
Major part of inequality explained by rural-urban inequality
All changes in overall Gini coefficient can be explained by rise in intra-group effects in urban areas
BUT the increase in the intra-class inequality is actually an increase in the inter-class inequality but appears differently due to the massive urbanization phenomenon
overlapping index of the informal workers in the rural areas has gone down stratification at the bottom
Explanations China
Development Workshop - Inequality in India and China22
poverty reduction happened in the early 1980s when the agricultural sector grew rapidlyAfterwards strong increases in inequality
main cause: rural classes (in particular, the farming community) have been left behind compared to the urban classes
Special Economic Zone strategy: other opportunities for farmers/migrants to increase income (especially in manufacturing)But often not well paid/low skilled workOn the other hand big improvements for skilled workers in
services/managers/owners occurred
Policy Suggestion by the Authors
Development Workshop - Inequality in India and China23
First, India and China need higher investment in agricultural sector and financial supportFor India, poor farmers need to be supportedImplementation of land reformDevelopment of market structure
Second, both countries need better allocation of laborsurplus labor in agricultural sector to otherJob creation should be strengthened
Policy Suggestion by the Authors
Development Workshop - Inequality in India and China24
Third, non-agricultural sector needs to be developedEspecially, IndiaChinese example of township and village enterprise in
1980s and 1990sFourth, India and China need to provide social
safety net
Conclusions
Development Workshop - Inequality in India and China25
Consumption inequality is rising in India as well as in China
India rise in INTER-class inequalityOverall inequality can be explain by INTRA-class
China rise in INTRA-class inequalityLosers: workers in manufacturing!Is inequality really occuring in rural-urban areas or
inland-coastal regions
Criticism
Development Workshop - Inequality in India and China26
Categorizing farmers by size of land they ownArbitrarily made (<2, 2-5, 5-10, 10<)Does not reflect productivity i.e. income
As well as productivity differ from location to locationCategorizing farmers by agricultural machines
they can use??
Other Literature
Development Workshop - Inequality in India and China27
Economic Growth and Income Inequality (1955)By Simon KuznetsInequality was decreasing, but should be higher level
Tax on capital gain Inheritance tax Inflation (tax on savings)
Other Literature
Development Workshop - Inequality in India and China28
Economic Growth and Income Inequality (1955)Natural cause of inequality
Demographical changeFertility rateMigration
SavingRich saves; therefore, acceleration of wealth growth
Other Literature India
Development Workshop - Inequality in India and China29
Why has economic growth been more pro-poor in some states in India than others? (2001)By Martin Ravallion and Gaurav DattFound that higher farm yields, higher state development
spending, higher non-farm output and lower inflation were all poverty reducing
Especially, non-farm output is a key to escape povertyHowever, initial condition is a key
States with low farm productivity, low rural living standards relative to urban area, greater landlessness in rural area and poor basic education and health had poor participation in growth of non-farm output
Other Literature India
Development Workshop - Inequality in India and China30
Why is Mobility in India so low?By Kaivan Munshi and Mark RosenzweigFound that local risk-sharing networks (insurance)
based on caste system restrict mobilityHouseholds with the network are less likely to “out-
marry” and “out-migrate”e.g. In rural area, out-marriage is less than 6%In Mumbai, it was 2% in 70s and 12% in late 90sEmpirically, households with the membership will
increase their permanent income
Other Literature about China
Development Workshop - Inequality in India and China31
Knight, John („Reform, Growth and Inequality in China”, 2007) finds similary inequality levelsHuge differences between urban-rural areas due to policiesMigrants from rural areas treated as second class citizensHuge benefits for urban citizens (higher wages, social security,
housing,...)Kanbur and Zhang („The Evolution of Rural-Urban and
Inland-Coastal Inequality in China, 1983-1995”, 1998) concentrate on inland – coastal inequality.Main driver of inequalityrural-urban gap is much higher than the inland-coastal gapBUT rural – urban gap stays more or less the same, while
inland – coastal inequality is rising dramatically
Other Literature about China
Development Workshop - Inequality in India and China32
Cont. Kanbur and ZhangReasons: migration may be easier to urban area from its
rural hinterland than from an inland area to a coastal area heavy restrictions on migration.
Policy of Local MigrationAim: “limit the interregional movement of workers to the
current level and the majority of redundant rural-workers should leave agriculture for new jobs locally” Most of migration happening intra-regional
the dynamic growth in the coastal areas has separated them from inlands
Policy Suggestions by others
Development Workshop - Inequality in India and China33
Inequality, Growth and Poverty in the Era of Liberalization and GlobalizationBy Giovanni Andrea Cornia and Julius Court
technology change and globalization are not important factors driving rises in inequality rather public policies
Traditional causes of inequality: Land concentration Urban bias Inequality in education
New causes of inequality: Excessive liberal economic policies Economic reform policies
Policy Suggestions by others
Development Workshop - Inequality in India and China34
Policies to address traditional causes of inequality1. Land Reform: land ownership inequality explains high
levels of income inequality in rural area Interpretation1. Land Reform: Take away lands from Rich and give them
to Poor
2. Expanding Education: increasing average years of schooling will reduce inequality
Interpretation2. Expanding education: Force kids to go school no matter
what
Policy Suggestions by others
Development Workshop - Inequality in India and China35
Policies to address traditional causes of inequality
3.Active Regional Policy: investment in education and transportation, power and water infrastructure are more effective in reducing regional inequality
Interpretation3.Active Regional Policy: Build power and water
infrastructure in poor countries and regions
GDP/capita and Gini Index
Development Workshop - Inequality in India and China36
020000
40000
60000
80000
gdppercapita
20 30 40 50 60gini
GDP/capita and Access to Clean Water
Development Workshop - Inequality in India and China37
020000
40000
60000
80000
gdppercapita
60 70 80 90 100improvedwatersource
GDP/capita and Electric Consumption/capita
Development Workshop - Inequality in India and China38
020000
40000
60000
80000
gdppercapita
0 10000 20000 30000electriconsumptionpercapita
Policy Suggestions by others
Development Workshop - Inequality in India and China39
Policies to address new causes of inequality1. Macroeconomic Stability: macroeconomic policies are key elements of
anti-poverty strategies such as minimizing output volatilities and avoiding sharp recession
Interpretation1. Macroeconomic stability: act like communists
2. Careful domestic and international financial liberalization and regulation: liberalization of domestic banking and of international financial flows have caused rises in income inequality
Interpretation2. Careful domestic and international financial liberalization and regulation:
regulate financial market so Rich cannot borrow money so easily so they cannot get richer faster
Policy Suggestions by others
Development Workshop - Inequality in India and China40
Policies to address new causes of inequality3. Equitable labor market policies: changes in labor market institution, such as
minimum wages, centralized wage setting, investing in human capital and employment protection, have contributed significantly to rises in wage inequality
Interpretation3. Equitable labor market policies: higher minimum wage, heavily centralized
wage setting, more investment in human capital for poor, and more employment protection for poor
4. Innovative tax and transfer policies: increasing tax revenues and progressive pro-poor expenditure can have direct and significant impact on income inequality
Interpretation4. Innovative tax and transfer policies: tax heavily on Rich and distribute it for poor
Solution to Income Inequality
Development Workshop - Inequality in India and China41
Why increase in income inequality?Rich gets richerPoor also gets richer (Poor does not get poorer)
But, not as fast as Rich
Solution to Income Inequality
Development Workshop - Inequality in India and China42
Solution 1: Boost income of PoorSolution 2: Cap income growth of RichWhich one should we choose??
Discussion
Development Workshop - Inequality in India and China43
How to reduce inequality?
Is manufacturing really an engine for growth?
Relationship between growth and inequality?