Title

CIIDWPNo.53-Cai Meng-Social Security transfers impact on inequality

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2016/11/30 20:58:09

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struggle12

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Introduction

Objective of this work is to evaluate redistributive role of public transfer on inequality in China. We attempt to answer two questions in this paper. Firstly, does inequality of after-transfers income narrow, compared to that of before-transfers? Secondly, given scale and distribution of the existing public transfer, will a small percentage increase in the transfers narrow or widen the inequality of total income? By employing methodologies of MT index and decomposition of Gini coefficient of total income by its sources, we find positive answer to the first question and negative answer to the second question. Namely, the public transfers have a positive role on inequality, in the sense that Gini coefficient of after-transfer income becomes small, compared to that of before-transfer income. On the other hand, the public transfers have a negative role on the inequality, as the current inequality will go up if there is a universal increase in the public transfers for all recipients. Of all components of the public transfers, formal sector pension benefits and medical expense reimbursements are disequalizing for inequality of the total income, while the Dibao and rural pension benefits are equalizing.

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