Explaining Trends in Regional Poverty in People’s Republic of China

Abstract

How poverty is measured in the People’s Republic of China (henceforth PRC) has considerable implications for analysis of the global trends in poverty. For some experience over the last 20 years in reducing poverty in PRC can be seen as the greatest success in meeting development goals of the twentieth century. Superficially at least the country appears a clear case study of the success of growth-oriented policies that have succeeded in pulling millions above the poverty line. However, it is also widely recognized that in some parts of the vast country the impact of growth on poverty has been less strong than in others. Also there is considerable dispute concerning the accuracy of the official poverty figures. This paper examines the question of poverty reduction in PRC by examining poverty trends across time and provinces in a simple panel data model. There is a lengthy literature on PRC that applies cross sectional regression models to provincial data however this is almost exclusively concerned with various tests for ‘convergence’ rather than examining trends in poverty. Examples of such convergence studies are Jian et al (1996), Raiser (1998), Fujita and Hu (2001), Aziz and Duenwald (2001) and Demurger et al (2001). The only cross-province study on poverty that we are aware of is in World Bank (2001) and we have tried to extend its analysis by applying a more detailed regression model over a longer time period. The paper begins with an overview of the picture on poverty in PRC, pointing to the alternative estimates of the numbers of the poor that are available and the data on the regional dimension of poverty. The second section presents the methodology employed in our analysis to explain trends in poverty. The third section discusses our results and the fourth and final section considers some brief policy conclusions.