Productivity growth, increasing income inequality and social insurance : The case of China?

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)395-408
Journal / PublicationJournal of Economic Behavior and Organization
Issue number4
Publication statusPublished - Dec 2001
Externally publishedYes


This paper builds a simple dynamic general equilibrium model to mimic two striking stylized facts observed in China's reform: productivity growth contributes significantly to output growth, and income inequality increases dramatically over time. Calibration exercises broadly matches the data. The economic growth rate, the aggregate productivity and income inequality increase as the coverage of the social insurance decreases. Perfect insurance is shown to be sub-optimal. With empirically plausible parameters, the level of income inequality under different degrees of social insurance can be very similar, even though their welfare implications are not. Social insurance cannot effectively reduce inequalities. © 2001 Elsevier Science B.V.

Research Area(s)

  • Inequality, O16, O41, O47, Optimal insurance coverage, Productivity growth, Social insurance