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Income distribution Section III the problem of income distribution The distribution of income and effective demand closely linked to economic fluctuations, but also directly linked to people&#39;s interests, which related to the economy and even political stability. Since 1980, China&#39;s reform and opening up, the income gap began to expand, the Gini coefficient from 0.2 in 1980 to the following up to around 0.3 in 1990, 1991-1996&#39;s rapid economic growth and further expand the gap of income distribution, Gini 1997 coefficient close to 0.4, from 1998 to 2003, the Gini coefficient appears to continue a significant upward trend, by 2003 China&#39;s Gini coefficient has risen to 0.46, a figure that exceeds the international distribution of income polarization of 0.4 serious warning line, only slightly lower than the world&#39;s highest level of 0.47 Latin American countries. This dramatic increase in the income distribution gap caused by the close attention of all, become the focus of China&#39;s economy one of the issues. That led to the serious gap between the current expansion of China&#39;s income distribution is very important because, thus we can propose a solution. Our previous analysis shows that the distribution of mainstream economics, the marginal productivity theory of factor prices is only a technical theory, and reality market economy in accordance with the &quot;value&quot; determined by the distribution of income is completely irrelevant, it can not be used for national income accounting statistics variable analysis of all current mainstream economic theory with statistical analysis of all the cycle with a serious inference, it can not show that the decisions and changes in income distribution.  Our previous analysis has shown that the distribution of income in a market economy depends on effective demand, the current status of China&#39;s income distribution is due to the high growth in 1991-1996 caused by the widening gap between income distribution, but since 1997 the macroeconomic policy caused serious structural contradiction to the increasing gap in income distribution. First, China&#39;s income distribution since 1992, changes 1, distribution of income and property Figure 10.1 shows the changes in China&#39;s Gini coefficient, the Gini coefficient from 1984, has been steadily increasing in a significant increase between 1990-1994, then 1995-1997 began in 1994 high (0.4334) decreased, but after 1998 began to rise dramatically in 2003, this indicator rose to 0.458.  ? Figure 10.1: National income Gini coefficient  In a variety of income sources, wage income, the average growth rate of the slowest. The ten years 1991-2003, the average annual growth rate is the fastest operating income, average annual growth rate of 29.68%, followed by 20.32% property income, came in third is transfer income, 18.86%, the slowest growth is wage income, the annual average growth rate of 15.47%. In 2003, property income growth rate of 32.18%, wage income growth over the same period was only 11.68%, the growth of the former much faster than the latter. These changes affect the pattern of income distribution and wealth concentration. China Statistics Information Network data, in 2003, 10% of our lowest income families in its total assets accounted for 1.4% of residents of the property, and the highest income 10% of affluent families and all residents of its property assets accounted for 45.0%, other 80 % of households hold 53.6% of total assets, and 10% of families almost no property. Assets from the urban per capita terms, per capita property at least 20% of the population share of property owned by only 2.75%, while the per capita property up to 20% of the population has reached 51.07 percent share of the property, which is 18 times more than the former.  There is also the financial assets to focus on trends in high-income families, the top 20% of households hold 55.4% of all financial assets, while the bottom 20% of households accounted for only 1.5% of all financial assets, the level difference of 33.1 times, 8.6% of China&#39;s well-off 60.47% share of financial assets. These data show that income and property of our ever-widening gap distribution. 2, urban-rural income gap ? Figure 10.2 Changes in the income of urban and rural residents Figure 10.2 that the 1990 income level of urban and rural residents in China since the changes, the income distribution gap gradually expanded from 1990-1994, per capita income reached in 1994 between the 2.86:1,1995-1997 improved, down to 2.5: 1 left, but the gap has soared since 1998, and over the past period, which makes the distribution of urban and rural income gap growing, now more than 3:1. 3, distribution of income of urban residents Since 1992, urban residents income distribution within the gap is growing serious. National Bureau of Statistics data show that income of urban residents in 1992, the Gini coefficient rose to 0.30 0.25,1994 years, after a slight decrease in 2002, rose to 0.32. According to Statistical Yearbook of the data shows that 10% of urban households in the highest income per capita disposable income and the poorest 10% of disposable income of households growing gap between the two when the ratio was 3.14 in 1992 times in 1994, rose to 4.11 times in 2000 is 5.02 times, after they increasingly can not be contained, reaching 8.43 times in 2003. According to the National Bureau of Statistics Cheng Diaodui from May to July 2002, eight provinces and small cities on a sample survey, 20% of our 2002 high-income households accounted for 43.6% of the total family income, while 20% of low-income households accounted for only 6.7% of total revenue. In 2003 the highest income households of urban per capita disposable income of households is 8.43 times the lowest income households. 4, the wage levels in different industries Overall, China&#39;s trade gap between the average wage there since 1990, is growing, as shown in Figure 10.3. In 1992, the highest and lowest average wage of workers in the industry, a difference of 1.86 times the wages of workers in 2002, the highest and lowest wages of workers in industry, a difference of 2.99 times. From 1990 to 2002, China&#39;s agriculture, forestry, animal husbandry, fishery and extractive industry average wage growth in the most slow, only an increase of 315.18 percent and 305.33 percent; the real estate and finance, and insurance sector average wage growth in the fastest, an increase of 591.08 percent and 812.49 percent, which is 2 to 2.5 times the former. ? Figure 10.3 with the highest income sectors with the lowest income sectors the ratio of the average wage of workers Incomplete statistics above show that the basic income distribution in China since the 90&#39;s changes, we come to explain the changes in income distribution. Second, income distribution and the economic cycle and the &quot;stagflation&quot; The data shown in the changes in income distribution has two boundary points, one in 1994, the year 1992-1996, the highest point of economic fluctuations, and the other started in 1998 and continues to this day, that is, the adoption of fiscal policy and monetary policy changes after the macro-control. We discuss in the last chapter in China&#39;s economic fluctuations is to 1997 as the cutoff point, the discussion of the 1994 as the dividing point of the 1991-1997 economic cycle, from the preceding analysis can clearly show that the total change in income distribution is determined by the effective demand. The previous focus on the analysis of effective demand in two key ratio, namely: (1) the proportion of wages in costs or wages on the proportion of asset value (W / K), the last chapter in the Figure 9.10 that the wages, depreciation and profit share in income, Figure 9.19 that changes in asset values; (2) wage share in income distribution, with W / (r + π) to represent it at the same time that wages and interest income as a property between profit and operating income ratio. We use Figure 9.4 indicated by the formula W / (r + π) which shows that changes in income distribution. ? Figure 10.4 Economic growth and income distribution changes From 1991-1994 the economic rise of the asset value to increase at a rate greater, which makes the wage decline in the proportion of costs, while enabling the distribution of income decline in the proportion of wages, economic growth after 1994, with the decline By 1997, increase the share of wage income, property income dropped significantly. In this way, we can explain the the Gini coefficient in this period of change, that is, the Gini coefficient reached 0.43 in 1994, the highest point of the Gini coefficient in 1997 fell to a low of 0.36. Figure 10.4 shows since 1992 W / (R + π) of the trend line, the overall trend line is downward sloping, indicating W / (R + π) values are declining, but in 1994-1997 the proportion of annual salary is more than a trend line. In front of the business cycle analysis shows that in 1997 China&#39;s serious economic downturn will inevitably result in large number of bankruptcies and closures, Congerkeyi Da Fudu Xiangdizichan Zhi, Tong Shi to Li Xi and profit incomes have dropped sharply Gongzi income is Because of the rigid and will not fall down, although there will be unemployment, but with the economic recovery can make W / (R + π) the value of the increase, narrowing income gaps. However, since 1998 the government adopted a large-scale financial investment spending and monetary policies to regulate the economy, not only did not bankrupt companies, but there is also a significant increase in asset value to the situation, as shown in Figure 9.19, since 1998 the value of large assets rate increase, which led to the wage income in total income continued to decline in the proportion, as shown in Figure 10.4, where wages over the 2000-2002 trend line was the result of substantial increase in wages for civil servants due, in Figure 9.10 if wages in the enterprise computing, the share of wages in income since 1998 has been dropped. So, we can explain why the earlier data on income distribution since 1998 from severe polarization, not only the distribution of national income Liu Liang, Erju Youfangdechan investment that the Zi Chan Zhi&#39;s Dafu Du Zeng Jia and stocks, bonds and Jin Rong a significant increase in assets is concentrated in the hands of some people, the Gini coefficient in the 6 years 1998-2003 increased by 10 points to achieve 0.458. Such a serious increase in the income distribution gap created in our economy since 1998, encountered serious &quot;stagflation&quot;, with the government&#39;s macro-control policy directly related. Let us give two examples to illustrate a more intuitive problems after 1998. Since 1998, the date, state-owned enterprises successfully completed a &quot;strategic&quot; shift, basically withdraws from the competition of basic consumer goods sectors, shifted from the government budget investment support of monopolistic Jichu industrial sector and high-end consumer goods sector, however, account for state-owned Enterprise 1 / 3 of the laid-off workers been transferred to the city&#39;s lowest-income labor services sector, which will inevitably lead to a serious increase in the income distribution gap. Another example is the development of real estate, since 1998, China&#39;s real estate investment growth rate higher than the average investment rate of more than 2 times the speed of development, land value and housing prices increased several times over, but the construction of housing cost is almost no increase in wages in the construction industry is working the service industry than in agriculture and the lowest, and many low-wage migrant workers not including real estate development that greatly expanded the gap in income distribution. This real estate development is by expanding the total expenditure in the government policies and commercial bank loans were able to support the development, from another perspective, in the 1994-1997 macroeconomic policy, real estate prices have been falling, and thus If there is no post-1998 financial and monetary policy, real estate prices will inevitably continue to decline sharply. Third, income distribution and consumption Income distribution is linked with the effective demand, the impact of changes in income distribution that is consumer demand, and thus effective demand. We show in front of 1991-1997 changes in income distribution impact on consumer demand, from Figure 10.5 can show that after 1998 the relationship between income distribution and consumption. Since 1998, with the Gini coefficient rising tendency of consumption in China continued to decline, there needs to explain the rise in consumer spending 1999-2001 with the substantial increase in salaries for civil servants concerned, even so, after 2000 this This trend is especially evident, which makes production in 1997 has been the problem of insufficient consumer demand has become more serious. Figure 10.6 shows the various income groups in China in 2003 households of urban residents per capita disposable income and the average propensity to consume, that low-income propensity to consume is much higher than high-income class. ? Figure 10.5 Gini coefficient and the propensity to consume ? Figure 10.6 China 2003 urban households of all income levels per capita disposable income and the average propensity to consume Since 1998, after the deterioration of income distribution, resulting in the average propensity to consume Chinese residents remained low. In 2000, the average consumption trend is 48.01%, the next three years, the propensity to consume were 46.55%, 45.30% and 43.35%, which led to a sharp drop in consumer demand. Since 1998, China&#39;s final consumption rate of less than 60% of the total final consumption has been below average annual growth rate of GDP growth. 2001-2003, consumption growth rate was 7.0%, 6.5% and 7.7%, respectively, lower than the nominal GDP growth rate of 3.4,2.9 and 4.8 percentage points over the same period of the investment growth rate was 15.26%, 12.93% and 21.46%. In recent years, GDP growth more dependent on investment, increased investment will continue to improve the asset value, investment and consumption growth in the widening gap between the value of assets brought up the problem of effective demand will be made more severe, climbed the corporate asset value will increase the depreciation and interest costs, the profitability of the enterprise becomes more difficult to obtain profits, the next issue of the cumulative rate of investment must be carried out, while making interest and profits increase more than wages income, the income gap will be further expanded. Decline in overall consumer spending growth, while high-income groups in the proportion of consumption increased significantly. According to UNDP statistics, China&#39;s total population, in 2003 the poorest 20% of total income or consumption share of only 4.7% of the total population, the richest 20% of the population share of total income or consumption up to 50% . This distribution of income distribution and consumption is bound to demand high-end consumer goods sector, leading to demand for basic consumer goods sector in serious decline. In recent years, villa, apartment real estate investment as the main driving force, affordable housing growth is gradually declining. 1999 -2 002 years, China&#39;s real estate operating income increased by 2.34 times, and the fastest growing real estate industry is villas, luxury apartments, four years, the villas, luxury apartments investment grew by 1.89 times and 2.83 times, in 2003, office buildings and villas, luxury apartments complete the amount of investment grew by 33.4% and 22.4%, while affordable housing only grew by 6% from January to October 2004, the National Housing Investment in growth of 27.9% , which increased 33.8% in office buildings, affordable housing is increased by only 5%. This uneven distribution of real estate investment reflects the current real estate investment is a high-income consumer groups object, resulting in significant resources to the only high-income to affordable villas and luxury apartments. 1998 -2 002 years, China&#39;s auto industry output value of the share of GDP, up from 3.56% to 5.52%, and the automotive industry is the fastest growing car, automobile production in China in 2003 increased by 43%.  On the other hand, even in low-income class of basic consumer goods are not met, while the production of basic consumer goods industry has continued to shrink, or even dwindling. 2001 per 100 rural households have washing machines only 29.24 units, refrigerators 13.59, tape recorders 20.79 sets per 100 urban households in the lowest income also has a washing machine only 79.21 units, refrigerators 63.11 sets, tape recorders 39.95 Taiwan; 2002 on average per 100 rural households have television sets only 60.45 units, air-conditioning 2.29 units per 100 urban households in the lowest income also have air-conditioning 51.10 Taiwan only to illustrate these basic consumer goods market has not yet reached saturation. However, it is corresponding to the shrinkage of its production in 2000, China&#39;s washing machine manufacturing industry, refrigerator manufacturing and radio, tape recorder output in the manufacturing sector share of GDP was 0.146 percent, 0.571 percent and 0.204 percent, while In 2001 this ratio dropped to 0.121%, 0.569% and 0.173%; in 2001 China&#39;s TV manufacturing and air-conditioning manufacturing share of output value in GDP was 0.794 percent and 0.911 percent, while in 2002 this proportion dropped to 0.707 percent and 0.688 percent. And this production declines not only in the proportion of change, and even also in the absolute value changes, the 2001 manufacturing washing machines and refrigerators in China manufacturing output in 2000 decreased by 1.227 billion yuan and 14.58 billion; in 2002 and China&#39;s TV manufacturing air-conditioning manufacturing output in 2001 decreased by 16.334 billion yuan and 2.873 billion yuan.  and is now the home appliance industry is a comprehensive approach to changing products to high-end products. This income gap caused by a serious increase in the consumption structure change in turn affected the distribution of income, so that the wealth gap continues to widen. Shrinking demand for basic consumer goods sector and the decline in growth in this sector wages will inevitably decline, resulting in poor sales of basic consumer goods sector, products, backlog, and led some companies to stop production or semi-cut-off and unemployed or underemployed population increases, wages fall and unemployment has increased the demand of basic consumer goods sector to decline further, forming a vicious circle. In high-income strata of wealth and income growth process, there is a &quot;revenue accelerator&quot; phenomenon, they are from their own investment and consumption growth in profits and higher incomes, because they are investment and consumption sectors is that they employment sectors such as real estate, telecommunications and other high-end cars and consumer goods industries, finance and insurance, education, culture and art and advertising, film and television industry and the scientific research and comprehensive technical service, and then continue to expand in the next issue of investment and consumption, which can a higher income, the formation of industry and income cycle between high-income groups. Since most high-income groups occupy the property and financial assets, the results of the two cycle must be the gap between income distribution. Currently focused on high-income groups most of the financial assets have a high ability to invest, but the direction of their investments almost no industry, but real estate and financial investments.  High-income strata of our country &quot;conspicuous&quot; consumption is so prominent, while the other is the low-level groups, income levels and consumption levels relative decline, when the fruits of economic growth only to share in the elite class, and a large Most people can not share the fruits of technological progress, it is easy to trigger social conflicts. Such as the construction industry in recent years the problem of wage arrears for migrant rural workers, that the vicious rise in prices under the conditions of builders can not afford even the meager wages of migrant workers, in fact, in many basic consumer goods industries and services have serious depression the question of wages and reduce labor protection standards, in particular the increase in unemployment, income decline, these problems have seriously affected social stability.  In 1989, Professor Gushutang in the socialist market economy must change the original principle of distribution according to work, while the use of &quot;distribution according to contribution.&quot; On the &quot;distribution according to contribution,&quot; whether a clean break with the marginal productivity of the issue has caused heated debate in economic circles, with this formulation since 1995 has gradually been accepted Ershi debate stopped, but the problem has not been clarified. See Gushutang 1989, the Soviet satellite in 1992, and Liu Yan Gushutang 1993.  Bi Xianping, Jane Xinhua: &quot;Chinese economic structure and the relationship between income distribution&quot;, in &quot;Economic Review&quot;, 2002 4.  Data Source]: 1992-2000 Summer on the Data is taken from China: &quot;The Gini Coefficient of Income situation in China&quot;, in &quot;Modern Finance&quot;, No. 5, 2003. 2001-2003 data obtained from the People&#39;s Network.  According to the Federal Reserve survey of U.S. household income, the past five years (1997-2001), the richest 10% of U.S. households have net assets (net of debt) increased 69%, and average household assets of 836 thousand dollars, and 20 % poorest families increased by only 20% of net assets per household on average only 7,900 dollars in the difference between rich and poor household net worth 104.5 times the difference between China&#39;s rich and poor household assets multiples of up to 254.5 times larger than the United States.  Source: &quot;Automotive Industry Yearbook&quot; (2000,2002)  washing machines, refrigerators, tape recorders, air-conditioning output data from the &quot;China Machinery Industry Yearbook&quot; (2001,2002); tape recorders, TV output data derived from &quot;electronic information industry statistics compilation (1992-2000)&quot; and &quot; Electronic Information Industry Annual Report &quot;(2001).  showed that: there is ability to invest in high-income families, select the number of shares times the total investment 33.07%; commercial and service sector accounts for 20.42%; Treasury bills accounted for 10.63%, other bank deposits.
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