Chinese Economic Development

18 Chinese Economic Development[Japanese data] exclude households engaged in agriculture, forestry orfishing, one-person households, foreigner households, households whichmanage restaurants, hotels or similar establishments, households with 4 ormore live-in employees and households where the head is absent long term.(Atkinson 1995: 69–70)[South Korean data exclude] wealthy households, single-person households,non-farm households in rural areas, and small farmers. (Hart-Landsberg1993: 199)A further area of concern centres on the measurement of regional inequalities.For one thing, there are big regional price differences within large developingeconomies, and these need to be allowed for in measuring true inequality. Inaddition, migration causes problems, because migrants are often excluded fromthe populations of destination regions (population figures are usually based onthe number of permanent residents) and because remittance flows can make asignificant difference to per capita income levels in rich and poor regions alike.More fundamentally, contrasting Gini coefficients across countries does notreally tell us very much about comparative levels of development because itsimply ducks the fact that some forms of inequality matter more, whether forgood or ill, than others. A country might have a high Gini coefficient, but that initself tells us nothing. We need much more information before rushing to judgement.Most obviously, the United States has long been a society characterized byconsiderable inequality, and it has often been condemned on such grounds. Yetthere is very little evidence that American society considers such inequality to bea matter of grave concern, at least in so far as preferences are demonstrated byvoting behaviour. Why is that?One issue affecting perceptions is whether observed inequality is permanentor largely transient. If the latter, it is less likely to be a concern. This argument isof particular relevance to developing countries, because it has long been arguedthat inequality follows an inverted U shape – that is, it rises in the initial stagesof development before falling back as a country becomes more prosperous. Thisis the famous Kuznets (1955, 1963) hypothesis, and it is easy to show that labourmigration from the low-income rural sector to the high-income urban sector willcause the Gini coefficient to follow such a pattern over time in a market-orientatedeconomy (Fields 1980). However, the empirical evidence suggests that theKuznets hypothesis does not hold (Anand and Kanbur 1993), and this undercutsattempts to argue that inequality is a short-term problem and therefore of little realconcern. Moreover, the evidence points overwhelmingly to the conclusion thatmarket-based economies like the UK and the USA are characterized by low anddeclining levels of social mobility (Glyn 2006). Indeed few societies are moreclass-ridden (in the sense that parental income is the most decisive influence onthe income of children) than the USA. The American dream is just that, evenif it continues to hold in its thrall the hearts and minds of so many of the USpopulation.