Social Equality, the Disinterested Government  and Economic Growth in China

  He Daxinga and Yao Yangb
                                 (a: School of Marxism, Peking University;    b: National School of Development and China Center for Economic Research, Peking University)

Abstract:This paper aims at providing a political economic explanation for China’s economic ascent from the perspective of social equality. Our key idea is that the equal social structure in China has led to the emergence of the disinterested government, i.e., a government that does not have consistent interests in any social groups, and such a government is more likely than a biased government to allocate resources to groups with higher productivity and thus promote economic growth. This explanation is presented in a repeated Stackleberg model analyzing the relationship between social equality and government policies in autocracies. Based on the results of the model, we provide evidence for disinterestedness of the Chinese government. In particular, we analyze several selective government policies that treat social groups differently and thus enlarge income disparities, but promote economic growth.
Key Words:Social Equality;  Disinterested Government; Economic Growth
JEL Classification:C72, O11, P26

                        Can Rural Industrialization Keep Working in China?

              Zhong Ninghua
                        （Department of Finance, Hong Kong University of Science and Technology；China Research and Policy Group, University of Western Ontario）

Abstract:Using data of 28 China’s provinces during the period of 1987—2008, this paper studies effect of Township-and-Village Enterprises’ (TVEs’) development in reducing China’s urban-rural income inequality. A significantly positive effect is found, which supports the idea that, through the movement of its productions, TVEs can compensate partly for the welfare losses caused by Hukou restrictions on the movement of labor force between rural areas and urban areas. However, a more important finding is, the yearly effects are decreasing, with very small values after the year 1998. This result suggests that TVEs’ compensation effects may have already been fully utilized. This is due to significant disadvantages of factories located in rural areas on the highly competitive China’s manufacturing product markets. The policy implication of this paper is, only by reforming the current Hukou system and strengthening the movement of labor and other factors, rather than by furthering rural industrialization, can China finally reduce its urban-rural income inequality.
Key Words:Rural Industrialization; TVE; Urban-rural Income Inequality
JEL Classification:D31, O18