Howes, Stephen R
(1993)
Income distribution: Measurement, transition and analysis of urban China, 1981-1990.
PhD thesis, London School of Economics and Political Science.
Abstract
Many aspects of economic analysis require judgements to be made about distributions. When agreement on a single criterion for judgement is not possible, it is necessary to examine whether one distribution is better than another from a number of perspectives. The problem of 'distributional dominance', which Part One addresses, is precisely this problem of ordering two distributions in relation to one or more objective functions, via use of a single 'dominance criterion'. Four themes are pursued. It is argued that welfare, poverty and inequality dominance criteria can be fruitfully analyzed within a single framework. The need to approach the problem of distributional dominance as a statistical one is stressed. Estimators and a method of inference are proposed and are themselves tested via a simulation study. The likely effect of aggregation on the attained ordering of distributions is assessed, also via a simulation study. A critical re-appraisal is presented of the most widely-used dominance criterion, second-order stochastic dominance, and alternative criteria are proposed. The usefulness of thinking of dominance criteria in terms of curves within bounds is emphasized. Part Two of the thesis is a study of the distribution of income in urban China in the eighties, using both aggregated, nationwide data and disaggregated data for two provinces. This study is both an application of the methods developed in Part One and a case-study of the dynamics of income distribution in a transitional economy. Evidence is found that cash-income inequality has grown over the decade, and this is linked to the reform process. However, inequality remains exceptionally low by international standards. Moreover, both the system of price subsidies and that of cash compensation introduced to replace the subsidies are shown to have exerted an equalizing influence on the urban distribution of income.
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