Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 06/2013: The Cost of Living in China: Implications for Inequality and Poverty

Ingvild Almås () and Åshild Auglænd Johnsen ()
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Ingvild Almås: Norwegian School of Economics and Business Administration, Postal: Bergen
Åshild Auglænd Johnsen: University of Stavanger, Postal: 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: China; Poverty; Inequality; CPI

JEL-codes: D01; E31; F01

43 pages, February 7, 2013

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