Income Growth,Income Gaps,and Rural Poverty Reduction in China

This paper analyzes the evolving trends in China’s rural poverty from 1988 to 2018 and how income growth and income gaps contributed to poverty reduction using rural household data from the China Household Income Project(CHIP). We find that after China’s reform and opening up policy introduced in 1978, China’s rural poverty has been reduced substantially due primarily to income growth, although this poverty-reducing effect was partially offset by widening income gaps. During the progress of this poverty reduction, however, income distribution replaced income growth as the key driver. For the extremely poor in particular, their poverty status hinged upon income distribution. As revealed by our empirical analysis of income sources, wage income became the chief source of income for rural households, contributing a rising share to poverty reduction in the countryside. The contribution of net income from government transfer to poverty reduction has increased in recent years, and this contribution has been increased with the deepening level of poverty. Calculation of the pro-poor growth index suggests that the poor population primarily benefited from the trickle-down effect of economic growth, and the economic growth pattern has yet to lean towards pro-poor growth.