Income Distribution

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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's interests, which related to
the economy and even political stability. Since 1980, China'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'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'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'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's economy
one of the issues.
That led to the serious gap between the current expansion of China'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 "value" 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. [1] Our previous analysis has shown
that the distribution of income in a market economy depends on effective demand, the
current status of China'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's income distribution since 1992, changes
1, distribution of income and property
Figure 10.1 shows the changes in China'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. [2]
Figure 10.1: National income Gini coefficient [3]
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. [4] 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'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
4, the wage levels in different industries
Overall, China'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'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's changes, we come to explain the changes in income distribution.
Second,      income      distribution    and     the    economic     cycle    and    the
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'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'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'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       "stagflation",          with      the
government'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
"strategic" 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'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'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'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'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'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'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%. [5]
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'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'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's TV manufacturing air-conditioning manufacturing output in 2001
decreased by 16.334 billion yuan and 2.873 billion yuan. [6] and is now the home
appliance industry is a comprehensive approach to changing products to high-end
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 "revenue accelerator" 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. [7]
High-income strata of our country "conspicuous" 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.

[1] In 1989, Professor Gushutang in the socialist market economy must change the
original principle of distribution according to work, while the use of
"distribution       according    to     contribution."     On     the
"distribution according to contribution," 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.
[2] Bi Xianping, Jane Xinhua: "Chinese economic structure and the
relationship between income distribution", in "Economic
Review", 2002 4.
[3] Data Source]: 1992-2000 Summer on the Data is taken from China:
"The Gini Coefficient of Income situation in China", in
"Modern Finance", No. 5, 2003. 2001-2003 data obtained from
the People's Network.
[4] 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's rich and poor household assets multiples of
up to 254.5 times larger than the United States.
[5] Source: "Automotive Industry Yearbook" (2000,2002)
[6] washing machines, refrigerators, tape recorders, air-conditioning output data from
the "China Machinery Industry Yearbook" (2001,2002); tape
recorders, TV output data derived from "electronic information industry
statistics compilation (1992-2000)" and " Electronic
Information Industry Annual Report "(2001).
[7] 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.