CIIDWPNo.54-Gao et al=Social Policy Reforms and Economic Distances in China: 2002-2013
Gao, Qin; Yang, Sui; Zhai, Fuhua; Wang, Yake
Published: 2016/11/30 21:10:16    Updated time: 2016/11/30 21:10:16
Abstract: Using the China Household income Project (CHIP) 2002, 2007, and 2013 data, this chapter examines the effects of a series of social policy reforms on the economic distances between the poor and the rich in urban, rural, and migrant families during this period. We find that, in urban areas, pensions helped narrow the economic distances consistently over the years, while other social benefits—including health insurance, social assistance, supplementary income, and in-kind benefits—had little or no redistributive impact. Both rural and migrant social benefits turned from being regressive in 2002 to progressive in 2013. In rural areas, supplementary income and in-kind benefits in the form of agricultural and livelihood subsidies played the most significant redistributive role among the social benefits in 2013, while private transfers also helped narrow the economic distances substantially. For migrants, health benefits and taxes and fees helped narrow the economic distances in 2013, despite to a smaller extent as compared to the rural social benefits. Despite the social policy expansions during this period, in both urban and rural China, market forces still played the dominant role in widening the economic distances between the poor and rich, which trumped the redistributive effects of the social benefits. These results suggest that China’s future social policy reforms face continued challenges in unifying the unbalanced urban-rural-migrant systems and keeping pace with the disequalizing market forces.
Keywords: Social policy; economic distance; inequality; pensions; agricultural subsidies


Gao, Qin (School of Social Work, Columbia University, USA)

Yang, Sui (Rural Development Institute, Chinese Academy of Social Sciences, China)

Zhai, Fuhua (Graduate School of Social Service, Fordham University, USA)

Wang, Yake (School of Insurance and Economics, University of International Business and Economics, China)



The Chinese government has launched a series of social policy reforms during the past 15 years that aimed to provide basic social protection to its citizens and unify the long-segregated social benefit systems across the urban-rural division. Part of the reason for these expansions is the rapidly rising income inequality in China that has surpassed the conventional alarm levels and threatens political stability and social harmony, both of which are high on the ruling communist party’s agenda. China’s national Gini coefficient rose from 0.44 in 2000 to to 0.49 in 2008, and then declined somewhat to 0.47 by 2012 but remained among the most unequal third of all countries (Li & Sicular, 2014; Ravallion & Chen, 2007). The fast growing number of Internet and social media users during this period also helped expose the widening income gaps and the imbalances in social benefits enjoyed by different population groups, promoting the awareness and demand for greater social protection among Chinese citizens.

To address these challenges and shift China away from solely focusing on economic growth, the Chinese government made significant social policy reforms to expand its social insurance and social assistance programs to extend coverage from urban employees to the urban non-employees, rural residents, and to some extent, rural-to-urban migrants. In 2006, the government launched a grand campaign to Build a New Socialist Countryside through a series of initiatives to improve the livelihood of rural residents. The enactment of the 2008 Labor Contract Law required all employers to sign labor contracts with employees and provide social insurance coverage for employees, including migrant workers.

How successful was this series of social policy reforms in redistributing resources and narrowing the economic distance between the poor and rich? Existing studies have examined the redistributive effects of selected social benefits, but rarely the complete set of social benefits. In addition, most existing studies relied on the widely used Gini coefficient to capture the redistributive effects of the social benefits on overall income distribution. However, none have specifically focused on the economic distance between the poor and the rich, the two ends of the income distribution that are often more sensitive to social benefit receipts than those in the middle.

In this chapter, we use data from the China Household Income Project (CHIP) 2002, 2007, and 2013 surveys to investigate how social policy reforms affected the economic distance between the poor and rich during 2002-2013. We use an innovative and revealing method to examine economic distance between the low- and high-income household and shed light on the income distribution beyond the overall level of inequality as captured by the Gini coefficient. Our findings can supplement the evidence that is based on the analyses of selected social benefits and relying on the Gini measure and offer important implications as China continues its social policy reforms and expansions.

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