Stéphanie Carret Development Workshop 1

Globalization and Regional Income Inequality: Empirical evidence from within ChinaPaper by Guanghua Wan, Ming Lu and Zhao Chen

Stéphanie Carret

Faculty of Economic ScienceUniversity of Warsaw

22th October, 2009

Stéphanie Carret Development Workshop 2

The Planning for today

1. Review of the paper: main ideas2. Analysis of illustrative graphs3. Questions raised?

« Spilled water is difficult to catch »

Chinese Proverb

Stéphanie Carret Development Workshop 3

China’s geography

3d largest country 9M km2 (Poland,

300000 km2) 4,845 km ENE – WSW 3,350 km SSE – NNW 1.3 billion people in

23 Provinces 5 Autonomous Regions 4 Municipalities 2 Special

Administrative Regions

Stéphanie Carret Development Workshop 4

Review of the paper: main ideas (1)

The authors examine the heat-debate about the impact of globalization (trade & liberalization) on inequality level Empirical evidence with the case of China, an emergent country

and power Dataset: 29 regions between 1987 and 2001 (excluding HK, TW…)

Economists’ views on globalization impact It increases inequality (Stiglitz) It diminishes inequality (Ben David) No relation with inequality (Sala i Martin) U-shaped pattern for the inequality/trade function (Krugman)

Problematic of the paper: How globalization and regional income inequality is related in

China? How much are they related?

Stéphanie Carret Development Workshop 5

Review of the paper: main ideas (2)

China’s insertion in globalization in a few facts & figures Deng Xiaoping’s famous « get rich!» message at the end

of the 70’s. « Doesn’t matter if the cat is black or grey; as long as it catches mice »

20 years of opening, largest FDI’s receiver and member of WTO since 2002

In 1994, trade (I/E) was almost completely deregulated From rank 32 to 5 as trader in the world economy

between 1978 and 2002 Chinese international trade in 2006 =$600billion, half of

its GDP Special Eco Zones and Open cities end 70’s: FDI flows

Stéphanie Carret Development Workshop 6

3 different regions in China: East, Centre and West these regions experience different level in FDI,

income, capital, privatization (see GDPs table)… See Figure 1.1 for FDI and openness levels

Even if unified national policy: different pace of globalization catching Non economical factors: pre-dispositioned

regions (coastal East and South), resources already available for FDI attraction, culture, local/regional governments…

Review of the paper: main ideas (3)

Stéphanie Carret Development Workshop 7

Inequality at the country’s level

The residual contribution Increase of Gini coeff

Stéphanie Carret Development Workshop 8

Analysis: What are the contributive factors to

inequality?

Stéphanie Carret Development Workshop 9

Ranking of contributive factors,

Gini Index

Stéphanie Carret Development Workshop 10

Conclusion & Questions

Solutions & Problems More public investment in the lagging regions Ease migration to the fast growing regions Institutional innovation to improve the performance of fiscal

decentralization: give fiscal advantages Targeted social protection for the poorest classes Development of financial market accross country:

government’s measures Promote FDI and trade in West and Central regions Ethnical troubles China has to deal constantly with the tackling of

inequalities: SOCIAL PACT The global rank of China in terms of inequality: a

necessity during the emergence?

Stéphanie Carret Development Workshop 11

Source:

Paper: “Globalization and Regional Income Inequality: Empirical

evidence from within China”,Paper by Guanghua Wan, Ming Lu and Zhao Chen

Stéphanie Carret Development Workshop 12

Questions?

Thank you.