Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 21/2012: The cost of living in China: Implications for inequality and poverty.

Ingvild Almås () and Åshild Auglænd Johnsen ()
Additional contact information
Ingvild Almås: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Åshild Auglænd Johnsen: University of Stavanger, Postal: Stavanger, Norway

Abstract: China’s economic development in recent decades has been tremendous, but subject to debate. This paper calculates regional prices that make incomes comparable across both time and space using the Engel-curve approach. Incomes are adjusted using these price indices, providing new estimates of inequality and poverty development. Our findings contrast with measures based on the official consumer price indices (CPIs) – in a time characterized by high economic growth,we find a larger increase in inequality and a more moderate poverty reduction than what is indicated by the CPI-adjusted measures.

Keywords: Inequality; poverty; China.

JEL-codes: D01; E31

35 pages, November 30, 2012

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