Poverty condition and characteristics in China: a re-analysis after the adjustment of equivalence scale

SONG Yang 1 ZHAO Jun1

(1.School of Economics, Renmin University of China)
【Knowledge Link】poverty profile; equivalence scale

【Abstract】This paper uses data from the Chinese General Social Survey (CGSS 2010) and adopts the new methods of family equivalence scale adjustment to re-measure the extent of the Chinese poverty, thereby building a complete method to measure China’s poverty. The data are divided into subgroups to be examined for China’s structural poverty characteristics in detail, analyzing the factors contributing to poverty by using the logit and tobit models. We found that when measuring poverty in China, it is necessary to carry out equivalence scale adjustment in accordance with the family scale and family composition. The poverty rate falls to 5.8 percent after adjustment, which is nearly half the percentage before the adjustment. Much existing literature does not consider the conditions such as family economic resource sharing. Consequently, the poverty rate is overestimated in China. Moreover, the data analysis substantiates the income’s essential role in helping a family out of poverty. The more employed family members are and the better their quality is, the less likely it is for the family to fall into poverty.

【Keywords】 poverty; equivalence scale adjustment; poverty profile; labor market;

【DOI】

【Funds】 Research Fund of the Renmin University of China (Fundamental Research Funds for the Central Universities, 15XNB007).

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(Translated by ZHAO Shichen)

    Footnote

    [1]. ① Only several papers have adopted an adjustment of equivalence scale based on different family scale when focusing on certain provinces or on the poverty problems in China in the 1990s. However, the adjustment only took population scale into account, without considering the family composition. Papers as such include the research by Mcculloch and Galandrino (2003) in Sichuan, the poverty condition measurement in Shenzhen by Gravemeyer, Gries and Xue (2010), as well as Zhang and Wan (2006) and Osberg and Xu (2008), who used the CHIP data in 1995 to measure the national poverty condition. [^Back]

    [2]. ② Household refers to people living in the same residence, whereas family refers to members connected by blood or marriage. [^Back]

    [3]. ③ That is, the unit of sharing economic resources employed in this paper is “family,” but it has a more specific meaning, namely the family members who are not economical independent from the respondents. The reason why we use family rather than household as a shared unit is because the income sharing within a family is more common. Since the poverty we define here refers to the condition in which the income is not sufficient to meet the basic everyday life need, using family as the measurement unit can more accurately reflect the condition of each individual’s disposable income, thereby more precisely measuring the poverty level. [^Back]

    [4]. ④ In terms of the literature using equivalence scale adjustments to measure poverty, two different methods are generally adopted. The first method is to adjust the poverty threshold, instead of adjusting the actual income of each family. Specifically, the equivalence scale factors are used to calculate the poverty thresholds based on different family scales, and then each family’s income is compared with the corresponding poverty threshold according to the family scale. If the income level falls below the poverty threshold, this family is considered to be in poverty (Zhang and Wan, 2006). The second method takes the opposite direction. Instead of adjusting the poverty threshold, the actual income of each family is adjusted. Namely, the poverty threshold is fixed, but the family income per capita is adjusted by the equivalence scale to obtain comparable family income. Afterwards, the comparable income is compared with the fixed poverty threshold (Osberg and Xu, 2008; Gravemeyer, Gries and Xue, 2010). This paper adopts the second method. There are no intrinsic difference between the two methods. [^Back]

    [5]. ⑤ If we set the poverty threshold as z, then based on Formula 3, we can derive the gap between the average income of people in poverty and the poverty threshold, that is, the average poverty gap index is (P1/P2) z. [^Back]

    [6]. ⑥ Education level options include uneducated, private-schooling, elementary school, junior high school, vocational high school, senior high school, secondary school, school of technology, college (adult higher education), college (formal education), university (adult higher education), university (formal education), postgraduate and above. [^Back]

    [7]. ⑦ Since CGSS survey focuses on the unit of family, and more than 70 percent of the respondents are aged between 18 years to 55 years old. They can be regarded as the main labor force. [^Back]

    [8]. ⑧ The eastern region includes Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan. The central region includes Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan. The western region includes Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang. [^Back]

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This Article

ISSN:1002-5502

CN: 11-1235/F

Vol , No. 10, Pages 65-77

October 2015

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Article Outline

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Abstract

  • 1 Introduction
  • 2 Literature review
  • 3 Data source and description
  • 4 Poverty condition in China
  • 5 Characteristics of poverty and its contributing factors
  • 6 Conclusion
  • Footnote

    References