Economic Growth, Income Distribution And Poverty Reduction In Rural China

The poverty problem has been one of the most serious challenges for the human society. Owing to the impact of many factors, such as less development, bad location, and the lower literacy of the poor, there is still a great poor population in China, most of which locate in remote areas. At the same time, because of various factors, the phenomenon of going-back poverty will still exist and the task of reducing poverty will be more and more difficult in the future.Nevertheless, since the reform in 1978, China has made brilliant achievements in rural poverty reduction, succeeding in reducing the rural poor population from 260 million in 1978 to 23.65 million in 2005. At the same time, the incidence rate of rural poverty has also fallen sharply from 32.9% in 1978 to 2.6% in 2005. This achievement is made under the condition of fast economic growth. From 1979 to 2005, the average growth rate of GDP per year reaches 9.6 percent. But while the economic growth and poverty reduction has gained proud achievement, the income gaps between residents in China have been enlarging constantly, which has already seriously weakened the promotion of economic growth to rural poverty reduction.This dissertation analyses mainly the impact of economic growth and income distribution to the rural poverty since reform in China. It also studies the influence of economic structural change, which is related to economic growth, on the rural poverty.Domestic and foreign scholars put forward different viewpoints for the relation between economic growth and poverty. Starting from "drop-down effect ", some scholars suggest that economic growth is helpful for poverty reduction; basing on the Kuznets"inverted-U"hypothesis, the opponents think that,owning to the enlarging income gap in the initial stage of economic development, economic growth is disadvantageous to poverty reduction. The case of China offers footnote for the argument. This dissertation mainly analyses how the economic growth affects rural poverty reduction during the period of reform in China. The analysis shows that the poverty-reducing & development fund have efficiently promoted the poverty reduction in rural China. But the major power of reducing poverty in rural China is economic growth, instead of the poverty-reducing & development. After elaborating the general situation and feature of economic growth in China since reform, this dissertation puts forward an econometric analysis for the efficiency of economic growth for poverty reduction, and shows that, since middle of 1980s, 70 percent of the poverty reduction of rural China comes from the fast economic growth. There are mainly two channels, income growth and employment growth, through which economic growth affects rural poverty; both channels have positively promoted rural poverty reduction. So the fast economic growth in China is a necessary condition of rural poverty reductionEconomic growth is related closely with the change of economic structure, and both have mutual promotion to each other. Therefore, the impact of economic structural change on the rural poverty is analyzed specifically in Chapter 5. The major viewpoints are given as follows:(1) Agricultural growth, especially at the beginning of reform, has efficiently reduced rural poverty by raising the income of peasants. But changes of agricultural structure impact the welfare levels of different agricultural producers, and so make the profit gained by the poor from agricultural growth different.(2) The development of rural non-farm indutries has efficiently absorbed surplus labor forces of rural areas, has increased the income of peasants, and so has improved the situation of rural poverty. In the process, the development of the township and vilege enterprises (TVEs) and engagement in industries have play an important role; the former promoted the non-farm employment locally during middle of 1980s and the beginning of 1990s and the later have promoted the non-farm employment out of rural areas since the beginning of 1990s.(3) The migration of rural residents to city, especially the quick development of urbanization, has changed the structure of urban and rural resident. It has reduced rural poverty through direct effect (the migration of the poor decrease the poor rural pollution) and indirect effect (the income of non-leavers improves because they may get more resources).(4) The re-employment of unemployed workers emerging in process of state-owned reforms has reduced the employment opportunity of peasants who migrate to city or want to find work in the city, and so has obstructed rural poverty reduction.(5) The development of non-state owned enterprises has inducted a lot of surplus labor forces of rural areas, and has efficiently reduced rural poverty through employment growth.(6) The impact of the foreign trade growth to rural poverty is ambiguous, but the econometric analysis in Chapter 7 show that foreign-trade growth worsened the rural poverty before the mid 1990s and it has been beneficial to reducing rural poverty after then. The dynamics of poverty is not only influenced by the situation of economic growth, but also impacted by the condition of income distribution. This dissertation econometrically analyses the role of the larger income distribution gap put on rural poverty reduction. Its conclusion shows that the enlarging income gap has worsened the situation of rural poverty since 1990s. The proportion negatively takes up 10 to 20 percent of rural poverty reduction and the effect shows a progressively tendency. The analysis on the mechanism of the influence shows that the enlarging income gap blocks up the channel of "drop-down effect " resulted from economic growth and results in "the Matthew effect" of income distribution; the enlarging income gap causes phenomenon that the poor have not enough capital (especially human capital) to change their condition and fall into"a vicious circle of poverty trap"; the enlarging income gap also makes consumption and invest lack of enough power to promote economic growth and decreases the efficiency of economic growth to reduce poverty.In order to analysis in general the poverty reduction in rural China, the consults above are inspected empirically in Chapter 7. Through the decomposition of rural poverty and the appraisement of growth quality, this dissertation suggests that economic growth has efficiently reduced poverty in general, but inequality in income distribution has offset in certain degree the benefit that economic growth brought about to the poor and has been weakening the efficiency of economic growth to reduce poverty. The econometric analysis in general show that fast economic growth has promoted rural poverty reduction and the enlarging income gap has decreased the efficiency of economic growth to reduce poverty; both of them has formed the major factors that influence rural poverty in China. Besides, agriculture growth, the development of non-farming employment and non-state owned enterprises (including TVEs) has also contributed greatly to rural poverty reduction.Finally, this dissertation owes fast economic growth, the enlarging gap of income distribution and the dynamics of rural poverty related with these two aspects to the institutional change. Therefore, the policy meaning of this dissertation is that the strategy of economic growth in China must be shifted from "let part since having first" to "it is first rich to have after driving" in order that the poor can share more benefit brought about by economic growth.