Inequality and Development in China

Using a panel data of China that covers the time period from 1997 to 2011, this research studies the impacts of four factors on inequality – income level, emigration, public spending on education, and public spending on infrastructure. This study contributes to the literature with seven key findings. First, there is no strong evidence that supports the Kuznets Hypothesis. Second, the impact of emigration on inequality in the sending area shows significant heterogeneity across municipalities. Third, the effect of emigration depends on the definition: overall, permanent emigration has reducing effect, whereas temporary emigration and emigration of people who sought employment have increasing effects. Forth, the impact of temporary emigration and emigration of people who sought employment vary with the income level: they tend to decrease inequality when income level is low, and increase inequality when income level is high. Fifth, I find public spending on education increases inequality within regions. Sixth, public spending on infrastructure has reducing effect on inequality. Lastly, by using the lagged term, I find the income level affect inequality only after a period of time.Bachelor of Art