The Future Path To China’s Poverty Reduction—Dynamic Decomposition Analysis With The Evolution Of China’s Poverty Reduction Policies

Abstract

The paper uses the Shapley method to decompose poverty changes by income source and growth-distribution-cost according to the history of China’s poverty elimination policies in the last forty years. The analysis shows that economic growth contributed to most of the reduction in all periods. Increasing inequality has adverse effects on poverty elimination in that it makes people vulnerable to poverty, which bodes ill for future poverty alleviation. Wages explain most of poverty change for both the urban and rural areas in recent years and are the main reason for increasing inequality in rural areas. Agricultural income played a significant role in reducing rural poverty and inequality in early periods when China experienced many agricultural reforms. In the future, pro-poor growth, reducing inequality and building a relatively integrated urban–rural poverty alleviation system will be most important jobs for China’s poverty reduction.