Urban-rural gap and poverty traps in China: A prefecture level analysis

TL;DR

This study analyzes income dynamics in China's urban and rural areas at the prefecture level, revealing persistent gaps, regional differences, and poverty traps, emphasizing the need for targeted policy interventions.

Contribution

It applies a distribution dynamics approach to identify persistence, polarization, and regional convergence patterns in urban-rural income disparities in China.

Findings

Urban and rural areas converge into distinct steady states.

Poverty traps exist in both urban and rural prefectures.

Regional differences influence income distribution dynamics.

Abstract

Urban-rural gap and regional inequality are long standing problems in China and result in considerable number of studies. This paper examines the dynamic behaviors of incomes for both urban and rural areas with a prefectural data set. The analysis is conducted by using a distribution dynamics approach, which have advantages in examination on persistence, polarization and convergence clubs. The results show that persistence and immobility are the dominant characteristics in the income distribution dynamics. The prefectural urban and rural areas converge into their own steady states differentiated in income levels. This pattern of urban-rural gap also exists in three regional groups, namely the eastern, central and western regions. Examination on the dynamics of the poorest areas shows that geographical poverty traps exist in both urban and rural prefectural areas. Our results indicate that more policy interventions are required to narrow down the urban-rural gap and to eliminate the poverty traps in China.