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Loren Brandt Corrects a Misperception about China’s Inequality

Loren Brandt

On 9 November 2006, Loren Brandt, professor of economics from the University of Toronto, gave a comprehensive assessment of changes in China’s inequality during the reform era at the Contemporary Chinese Economy Series, co-sponsored by PHCWP, EAS, and PIIRS. Using the most updated and comprehensive survey data and summing up a five-year long, collective research by a team of over 40 scholars, Brandt clarified prevailing misperception of China’s inequality. Among these misperceptions are rising income gaps between urban and rural residents and between the coastal and inland provinces. Brandt finds that urban-rural and coastal-inland gaps did not rise significantly since 1987, and in some cases it in fact slightly declined. He does find rising income gaps among “neighbors,” within cities and countryside in coastal or inland regions. Brandt then disaggregates income compositions of households and concludes that differences in wages account for the rising gaps. In conclusion, Brandt argues that differential human capital — primarily driven by education — is the root cause of inequality in today’s China, and assesses current policies adopted by the Chinese government to address inequality. (Min Ye)