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Unequal Transition: The Widening Wealth Gap amidst China’s Rapid Growth

Author

Listed:
  • Yangtian Jiang

    (Institute of New Structural Economics, Peking University, Beijing, China.)

  • Yu Zheng

    (School of Economics and Finance, Queen Mary University of Lon-don. Mile End Road, E1 4NS London, UK.)

  • Lijun Zhu

    (Institute of New Structural Economics, Peking University, Beijing, China.)

Abstract
We propose a quantitative theory of wealth creation and distribution during China’s transitional growth from the early 1990s, when barriers to setting up private businesses, trading housing, and migrating from rural to urban areas are struck down. In response to the changing economic environment, a small entrepreneurial class emerges and accumulates substantial wealth, whereas the majority working class, partly due to limited investment available from an underdeveloped financial sector, uses housing as the main vehicle of wealth accumulation over the course of a long-time housing boom. Our heterogeneous-agent dynamic equilibrium framework determines growth and equity jointly. We show a reasonably calibrated version of the model matches the rise in urban China’s wealth inequality since 1995 almost exactly. We further quantify the relative contribution of different reform measures to the rising inequality and discuss the welfare implications taking into account possible growth-equity trade-offs.

Suggested Citation

  • Yangtian Jiang & Yu Zheng & Lijun Zhu, "undated". "Unequal Transition: The Widening Wealth Gap amidst China’s Rapid Growth," Working Papers 955, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:955
    as

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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/wp955.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Wealth inequality; Capital accumulation; Entrepreneurship; Housing; Migration;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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