مدلسازی نابرابری درآمد و گشودگی در چارچوب منحنی کوزنتس : شواهد جدید از چین

This article tests the relationship between openness and income inequality in openness Kuznets curve framework. The Auto Regressive Distributed Lag (ARDL) estimator is employed to establish the long run relationship between openness and income inequality. We add to the literature by noting that Kuznets curve fits the relationship between openness and income equality in the case of China. This evidence is new and in line with the Kuznets hypothesis that income inequality rises with the increase of openness and then starts fall after a critical point.

The government of China adopted a gradual policy of opening to the outside world in 1978. Since then the trade to GDP ratio raised from 8.5% to 67% and average tariff rates reduced from 49.5% to 8.5% along with 10% annual GDP growth. Indeed, this policy is one of the most important policies in the modern history of international economics which paved a way for economic growth of China. The literature shows that there is a positive relationship between trade openness and economic growth of China (Jin, 2004). However, this economic growth and openness is accompanied with the increase in income inequality in the country. The Gini coefficient, a measure of income inequality, witnessed several peaks and troughs over the last six decades and went up from 22 in 1952 to 46 in 2009 (see Fig. 1). The Great Famine in early years, the Cultural Revolution with transitional phase to reforms from 1966 to 1978 and opening up to trade from 1985 to 2007 produced the peaks in the Gini coefficient. On the other hand, the land reforms in early periods, post famine recovery in early sixties and rural reforms from 1978 to 1984 were the major reasons of reduction of Gini coefficient. But Gini coefficient has been taking a sharp and apparently endless rise since 1985. This was the period of opening up to trade, foreign direct investment and higher financial development. Therefore, there is a view that the openness is one of the causes of income inequality in China. But a closer look tells that the income inequality is increasing with decreasing rate and the marginal effect of openness on Gini coefficient is decreasing over the time (see Fig. 2) It is evident from Fig. 2 that there may be curvilinear relationship between openness and inequality. Therefore, it is possible that the openness variables may replace the economic growth in the Kuznets curve framework and income inequality may reduce as the openness reaches its turning point (Lee, 2010). The Kuznets curve postulates that the income inequality rises at the initial stage of economic growth and then improves after a certain point of economic growth. Dobson and Ramlogan, 2009 and Lee, 2010 note that openness may better be replaced the economic growth in the framework of Kuznets curve. In this paper, for the first time, the openness–inequality relationship is tested in the framework of Openness Kuznet's Curve for China over a time period of 1952–2009. We take five different variables to proxy the openness. This further adds to the novelty of this paper. The rationale for choosing China is quite obvious that China is perhaps the best example of the rising income inequality along with the increase in openness. The rest of the article is distributed into five main sections. Section 2 connects the study with the previous literature on openness and income inequality nexus. In Section 3, the detailed discussion on selecting the data and construction of variables for the empirical testing is presented. The empirical model and econometric strategy have been discussed in Section 4. The empirical results have been reported in Section 5, and finally in Section 6 conclusions have been drawn.

This article tests the openness–inequality nexus under the Kuznets curve framework by using the ARDL methodology relying on the carefully selected five alternative measures of openness with a data series of almost six decades, that is, from 1952 to 2009. We find a curvilinear relationship between openness and income inequality measures. This implies that the income inequality rises with the increase of openness and falls after a certain critical point. The finding is robust to different measures of openness and to different sample sizes. Furthermore, our findings also suggest that the growth of per-capita GDP and financial development also contribute in alleviating of income inequality. On the basis of our findings we can fairly conclude that the income inequality is not increasing endlessly in the case of China. But we support the idea of Dollar (2005) that the further openness with free market access to advanced economies may reduce the income inequality. Our research advises that government of China should continue with gradual openness policies. However, it is also important that some redistribution policies should be introduced to curtail the initial adverse effects of openness. Furthermore, as the findings of this work have shown, financial development and growth in per-capita GDP contributes in the income inequality alleviation in China. Therefore, we suggest to policy-makers to take the necessary actions to ascertain financial development and capital formation. It is also vital, especially when Chinese government has recently shifted the weight to the domestic demand rather than export-investment and income equality rather than economic growth, that further institutional reforms are brought into effect for more efficient allocation resources. For example, the investment policies, through the soft bank lending, may be encouraged in the poor regions.