Estimating income inequality in China using grouped data and the generalized beta distribution

Chotikapanich, Duangkamon, Rao, D. S. Prasada and Tang, Kam Ki (2007) Estimating income inequality in China using grouped data and the generalized beta distribution. Review of Income and Wealth, 53 1: 127-147. doi:10.1111/j.1475-4991.2007.00220.x

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Author Chotikapanich, Duangkamon
Rao, D. S. Prasada
Tang, Kam Ki
Title Estimating income inequality in China using grouped data and the generalized beta distribution
Journal name Review of Income and Wealth   Check publisher's open access policy
ISSN 0034-6586
Publication date 2007
Sub-type Article (original research)
DOI 10.1111/j.1475-4991.2007.00220.x
Volume 53
Issue 1
Start page 127
End page 147
Total pages 21
Place of publication Oxford
Publisher Blackwell Publishing
Language eng
Subject 340210 Welfare Economics
340207 Labour Economics
Abstract There are two main types of data sources of income distributions in China: household survey data and grouped data. Household survey data are typically available for isolated years and individual provinces. In comparison, aggregate or grouped data are typically available more frequently and usually have national coverage. In principle, grouped data allow investigation of the change of inequality over longer, continuous periods of time, and the identification of patterns of inequality across broader regions. Nevertheless, a major limitation of grouped data is that only mean (average) income and income shares of quintile or decile groups of the population are reported. Directly using grouped data reported in this format is equivalent to assuming that all individuals in a quintile or decile group have the same income. This potentially distorts the estimate of inequality within each region. The aim of this paper is to apply an improved econometric method designed to use grouped data to study income inequality in China. A generalized beta distribution is employed to model income inequality in China at various levels and periods of time. The generalized beta distribution is more general and flexible than the lognormal distribution that has been used in past research, and also relaxes the assumption of a uniform distribution of income within quintile and decile groups of populations. The paper studies the nature and extent of inequality in rural and urban China over the period 1978 to 2002. Income inequality in the whole of China is then modeled using a mixture of province-specific distributions. The estimated results are used to study the trends in national inequality, and to discuss the empirical findings in the light of economic reforms, regional policies, and globalization of the Chinese economy.
Keyword households
Regional inequality
Rural China
income
grouped data
provinces
Q-Index Code C1

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
School of Economics Publications
 
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Created: Mon, 18 Feb 2008, 16:26:51 EST