The Future Path To China's Poverty Reduction-Dynamic Decomposition Analysis With The Evolution Of China's Poverty Reduction Policies

Abstract

The paper uses the Shapley method to decompose poverty changes by income source and growth-distribution-cost according to the history of China's poverty elimination policies in the last forty years. The analysis shows that economic growth contributed to most of the reduction in all periods. Increasing inequality has adverse effects on poverty elimination in that it makes people vulnerable to poverty, which bodes ill for future poverty alleviation. Wages explain most of poverty change for both the urban and rural areas in recent years and are the main reason for increasing inequality in rural areas. Agricultural income played a significant role in reducing rural poverty and inequality in early periods when China experienced many agricultural reforms. In the future, pro-poor growth, reducing inequality and building a relatively integrated urban-rural poverty alleviation system will be most important jobs for China's poverty reduction.

Keywords: Economic growth; Income distribution; Poverty reduction; Shapley decomposition.

Fig. 1

The technology roadmap of the paper

Fig. 2

Per captia real income and its growth for urban and rural households. Data Sources China Statistical Abstract 2016 & China Compendium of Statistics 1949–2008. Note: real income means the income and its growth rate are calculated at 1978 prices

Fig. 3

The growth rate of GDP, per capita GDP, primary industry, secondary industry and tertiary industry. Data Sources China statistical Yearbook 2016. Note: Data in this figure are calculated at constant prices

Fig. 4

The fluctuation of CPI in China (1985–2015). Data Sources China statistical Yearbook 2016

Fig. 5

China's rural poverty from 1978 to 2016. Data sources Poverty monitoring report for rural China 2017. Note: Since 1978, China has adopted three different national poverty standards: the “1978 poverty standard”, “2008 poverty standard”, and “2010 poverty standard”. The “1978 poverty standard” is 100 yuan per person per year at 1978 prices, and it is based on the minimum subsistence standard, which can guarantee people’s demand for 2100 cal and some other necessities each day, with the food expenditure accounting for 85%. The “2008 poverty standard” is 865 yuan per person per year at 2000 prices; it was adopted in 2008 and actually used beginning in 2000. This poverty line reduces the proportion of food expenditure to 60%. In 2012, China’s government raised the poverty standard on a large scale to 2300 yuan per person every year (constant prices in 2010); we call this the “2010 poverty standard”. Under this poverty standard, the poverty line is 2536 yuan per person per year in 2011. According to the World Bank, PPP 1$ = 3.696; thus, China’s official poverty line is 2.3 dollars per day, which is 1.21 times the international poverty standard of 1.9 dollars per day

Fig. 6

Dynamic change of China's rural income composition. Note: hhbus is household income from business, hhagri is household agricultural income, hhothr is other income sources, hhsub is household income from subsidy, and hhwage is the household wage income

Fig. 7

Dynamic change of China's urban income composition. Note: hhbus is household income from business, hhagri is household agricultural income, hhothr is other income sources, hhsub is household income from subsidy, and hhwage is the household wage income

Fig. 8

The transition of rural poverty in the four periods