Income Distribution Of China's Rural Residents

As one part of the reform and opening up policy, the contract responsibility system reform has been undertaken in Chinese rural areas. With China's rapid economic development in rural areas, rural residents have experienced a significant improvement in overall living standards. However, due to the differences of economic conditions and personal qualities, the diversity of distribution elements, and the variety of income sources, the degree of inequality of the income distribution of rural residents gradually increase."Three rural"issue (issues concerning agriculture, countryside and farmers) has become the major issues of the community, government and academia. Increasing their income and narrowing the income gap within rural residents have become top priority of"three rural"issue.Income distribution has been one of the major propositions of economics studies. From the perspective of the theoretical development, the study of income distribution theory is based on the classical economics'study, and that of neo-classical economics has become the mainstream of the modern Western economics. However, in the field of theoretical research, there is still plenty of room for further interpretation of income distribution, for example, the changing trends in income distribution, the reasons for the gap, the mechanism of different elements, and the theoretical basis of income distribution effects resulting from various policies.Any theory needs to be tested and supported by empirical evidence. The relevant empirical research literature about the income distribution of rural residents shows that economic scholars use econometric research methods to conduct empirical research on the data obtained from real observation. However, empirical research methods they used are relatively simple. In recent years, with the development of econometrics, particularly the development of micro-econometric, some new research methods have been applied to the field of income distribution of rural resident, such as non-parametric methods, semi-parametric method, quantile regression, economic modeling, CGE, etc. The empirical studies on the income distribution of rural residents have achieved certain results. However, since China's economy is in transition period, the complexity and disorder of the economic environment make it difficult to get access to real, effective, comprehensive data. Furthermore, the limitation of researchers'cognition and research methods make it difficult to completely and accurately reflect the actual income distribution of rural residents. How to take adavantage of micro datasets of Chinese rural residents, microeconometrics and microsimulatiom methods in the research of situation, trends and causes of rural residents'income distribution as well as the effect of income distribution policies is an important issue facing Chinese economists.Based on the above discussion, this article conducted a study on the income distribution of rural residents of China based on micro-survey data of the income of rural residents of China, and by using of micro-metering and economic modeling approach in the theoretical framework of economics. This article provides some empirical analysis on the following issues:First, through incrementally relaxing the constraints of social welfare function, and by using the social welfare index comparison norms, such as Lorenz advantage of comparison, the generalized Lorenz advantage of comparison, the mean-variance comparative advantages, this paper compares and ranks the income distribution of rural residents in China since reform and opening up, and then use trend extrapolation, gray prediction method, and incremental predictive analysis method to predict future trends of income distribution of rural residents in China. The results show that: during the period of 30 years'reform and opening up, the changing trend of rural residents income distribution can be divided into three intervals: during 1978-1985, social welfare showed a rapid increase; during 1986-1997, the social welfare showed some volatility in its upward trend; and during 1998-2006, social welfare was rising steadily year by year. During the 30 year economic reform, two thirds of the time witness obvious social welfare Pareto improvement in the income distribution of rural residents; in the 30 years, income inequality in rural China increase at an average annual rate of 2.22%, while real income levels increase at an annual rate of 7.03%, resulting the social welfare index on income distribution of rural residents increase at an annual rate of 6.13%. The constant growth of income distribution social welfare of rural residents is due to the fact the rising real incomes of rural residents is enough to compensate a slight increase in income inequality within rural areas. Predicted results show that future income, income inequality and social welfare of rural residents in China will show the trend of increasing.In addition, the article analyze the root causes of China's rural residents income inequality by using China Health and Nutrition Survey data, applying Mincer equations to examine determinants of income of rural residents, using the regression equation of income inequality decomposition method proposed by Wan Guanghua-Shapley value decomposition method, The article also uses Fields and Yoo (2000)'s approach to analyze the root causes on changes of income inequality. The results show that labor inputs play an important role in the increasing of farmers'income that farmers'income increased by 19.60 percentage points by increasing one unit of labor input. Urbanization and industrialization significantly affected the household income. The sign of the coefficient estimates on the number of Pre-school is negative, indicating the more pre-school children, the less household income in a family. As the representative of the human capital information, years of schooling of the head of a family increase for each additional unit, the income increase 2.82%. The income of the farmer in eastern and western parts didn't exist significant disparities, while the income of the farmers in central part was lower than that of the western part. The acre of cultivated land, the number of elderly population, the gender and marital status of the head of the household have no significant impact on income. Labor inputs, wage income, human capital factors, geographic factors play an important role in the interpretation of income inequality of rural residents. Wage earners, as well as regional differences have played a positive role in the reduction of income inequality from 1997 to 2004 in rural areas, in which the effect played by wage earners reached 32%. To reduce the level of income inequality in rural areas, the utilization of arable land in rural areas and the investment in rural infrastructure should be increased; the differences between regions should be narrowed; reasonable, orderly, and actively flow of surplus rural labor to cities should be promoted to increase the non-farmers agricultural income; the investment in basic education in rural areas should be increased to improve farmers'education level. In order to achieve a general increase in living standards of farmers and to build a socialist harmonious society, the only way is to reduce the level of income inequality in rural areas.Secondly, the article analyzed human capital the impact on outside labor income and employment by using rural sample survey data, quantile regression method and the Heckman two-step sample selection bias and other methods. From the perspective of microeconomics, the article analyzed the effect of rural-city flows of China's rural labor force on the income distribution of rural residents. The results show that in different quantile regression results, in the 25% quantile regression, education (1.89%) achieved the maximum rate of return; while in the median regression, education got the minimum rate of return (1.40%). The income gap within a long time migrant working group is greater than that within a short time migrant working group. Income gap within the group that received training from other organizations is larger than that within the group that accepted corporate training. In high-income group, the smallest income gap occurred between men and women. After performing sample selection bias amendment, the rate of return of education rose to 4.55%, so the sample selection bias problem can not be ignored in examining the issue of income of rural labor migration. At the same time the study also found that education and technical titles will help migrant workers to find a job in high-wage sector. With one additional unit increase of income, the migrant workers would increase their likelihood to participate in social security by one time. The likelihood for the migrant workers with higher education, technical titles or the training to participate in pension insurance and unemployment insurance was two times larger than that of the control group. This paper applied the two analysis methods that one uses remittance income as farmers"extra income"and another one treats remittances income as potential"alternative revenue"of agricultural income. Two kinds of study showed that the migration of rural labor increases the rural income inequality level.Again, the article analyzed influencing factors for the return of rural labor force in China by using rural sample survey data and micro-measurement methods. By assuming that returning migrant workers continue working outside, the article stimulate the effect of city-rural flows of China's rural labor force on the distribution of income of rural residents. The results showed that the financial crisis, age, the length of migrant working, workers'income, working place, working industry, and level of education have an important influence on the return of the workers. The financial crisis has an extremely important influence on migrant workers'return to hometown; the longer time of migrant working reduce the probability of return by 7.45%; the higher level of school education of migrant workers reduce the probability of return by 4.35%; the migrant workers in construction and manufacturing sectors increase the probability of return by 5.17% and 3.22% compared to other sectors of the migrant workers. The financial crisis, gender, age, working time and working place, working industry, education level, technical level have a significant influence on migrant workers'concern for skills training, provision of business support and employment information. During the financial crisis, the occurrence of the returning migrant workers'concern for the four issues was about 2 times larger than the period with no financial crisis; the occurrence for men to concern for the business starting support was 1.36 times larger than that for women; with one year older of the migrant worker, the odds of his interest in skills training would change by one times; with the technical level, the odds of migrant worker'concern for entrepreneurial support was 1.53 times larger than the workers without the technical level. The return of the rural labor force expanded the extent of income inequality of rural residents, and it also increased the number of poor rural residents.Finally, the article analyze the effects of China's the rural policies on income distribution rural residents by using rural sample survey data and micro-simulation model. The results showed that the policy of direct subsidies have more significant impact on the average household income levels of rural residents increase which was nearly 5%. Using the Gini coefficient measure of income inequality as indicators, in 2008, Jilin Province witnessed 2% decrease in income inequality. It also found that the poverty rate, poverty gap and FGT have dropped significantly, especially the FGT poverty index, the 31.25% decrease of which showed that direct subsidies policies, as one of the most direct public policy, has a positive role to alleviate poverty, and reduce the income gap. Rural minimum living security policy targeting the low-income households made their income level increased by 11.23%. The overall Gini coefficient fells by 1.21%. Rural minimum living security policy increased the income level of poor farmers, thus causing a decline of the poverty gap. FGT poverty index fell by 90.00%. Rural minimum living security system played a certain degree of positive impact for raising the income level of the poor, reducing income inequality in rural areas and eliminating rural poverty.The scientific results of the study provide a strong theoretical support and empirical evidence for the formulation and implementation of rural income distribution policies to improve income level of China's rural residents and reduce rural income inequality, reduced poverty levels in rural residents to ensure a steady and healthy development of the rural economy.