Social policy and income inequality during the Hu-Wen Era: A progressive legacy?

Abstract

The Hu-Wen era saw significant expansions in social policies in China. How did these policy changes affect income inequality, and did they leave a progressive legacy? Using the China Household income Project (CHIP) 2002, 2007 and 2013 data, this article offers empirical evidence to answer these questions. We find that these social policy changes indeed led to some convergence of the divided urban-rural-migrant social welfare systems and helped curtail the growing income inequality driven by market forces. Measured as the share in household final income, the size of urban social benefits decreased, while those for rural residents and rural-to-urban migrants increased from 2002 to 2013. Social benefits-especially pensions-reduced income inequality in all three groups, although to a much smaller extent for rural residents and migrants as compared to their urban peers. Rural residents also gained from agricultural and livelihood subsidies through the Building a new socialist countryside initiative.