Urban Inclusiveness and Income Inequality in China

30 Pages Posted: 13 Sep 2017

See all articles by Leiju Qiu

Leiju Qiu

Central University of Finance and Economics (CUFE) - China Center for Internet Economy Research

Daxuan Zhao

School of Business, Renmin University of China

Date Written: September 11, 2017

Abstract

The issue of income inequality is exacerbating when China experiences the rapid economic growth during the past few decades. This paper argues that urban inclusiveness is one of the determinants of income inequality in Chinese cities, because the Hukou system restricts public service to Hukou-registered workers only. The impact of urban inclusiveness on income inequality and the underlying mechanism are discovered by examining how Hukou restriction affects income gap between skilled and unskilled workers and how the preferences on public services and urban inclusiveness vary across skilled and unskilled workers. With the 2005 Inter-Census Population Survey, we find skilled workers care more about public services and urban inclusiveness, so skilled workers are relatively scarce in exclusive cities, who hence can enjoy a higher skill premium, leading to a higher income inequality in exclusive cities.

Keywords: Urban Inclusiveness; Income Inequity; Chinese Cities; Public Service

Suggested Citation

Qiu, Leiju and Zhao, Daxuan, Urban Inclusiveness and Income Inequality in China (September 11, 2017). Available at SSRN: https://ssrn.com/abstract=3035574 or http://dx.doi.org/10.2139/ssrn.3035574

Leiju Qiu

Central University of Finance and Economics (CUFE) - China Center for Internet Economy Research ( email )

No. 39 Xueyuannan Road, Haidian District
Beijing
China

Daxuan Zhao (Contact Author)

School of Business, Renmin University of China ( email )

59 Zhongguancun Street
Beijing, 100872
China

HOME PAGE: http://daxuanzhao.weebly.com/

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