How gradualist are Chinese reforms? Evidence from rural income determinants
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01_Huang_How_gradualist_are_2017.pdf
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Author(s)
Huang, Yasheng
Qian, Meijun
Date Issued
February 2017
Journal
European Journal of Finance
Publisher
Taylor & Francis
Citation
Huang, Yasheng and Meijun Qian. “How Gradualist Are Chinese Reforms? Evidence from Rural Income Determinants.” The European Journal of Finance 24, 1 (February 2017): 19–35 © 2017 Informa UK Limited, trading as Taylor & Francis Group
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Author's final manuscript
Abstract
Gradualist reform (GR) is a strategy that implements partial and incremental reforms at the beginning but gradually deepens the reforms over time. Using income determinants in rural China as the measure of the GR hypothesis, this paper provides a direct test of the widely accepted claim that China has followed a GR strategy. In the sense that reform deepens, production factors should become more important income determinants over time. Our difference-in-difference analysis, based on a large panel dataset from fixed-site rural surveys conducted between 1986 and 2002, shows that the efficiency of return to production factors deteriorated over time instead. Households that had more production resources, such as land and labor, or that devoted more labor and time to entrepreneurial activities experienced better income growth in the 1980s, but households with better political status did so in the 1990s. Further difference-in-difference analyses show that these income patterns are related to an inefficient credit allocation due to government interference in the 1990s compared to market mechanisms in the 1980s. Overall, the empirical evidence on the income determinants and on rural finance does not support the GR hypothesis on China's reform path. Keywords: Chinese reform; rural finance; income growth; gradualism; reversal
MIT Department
Sloan School of Management
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DOI of Published Version
https://doi.org/10.1080/1351847X.2017.1290669
