take that responsibility for these elderly. As a result, the community/local support, overall
in China, is higher for the rural households.
Though in the past government policies have consistently favored urban residents,
recent changes in subsidies (such as food and housing) may be aggravating income
inequality, particularly in the urban sector (Khan et. al.,1999).
4.6. Poorly developed factor markets
China’s economic transformation from a centrally planned economy to a market economy
has been a very gradual process. It started with liberalization of prices (product markets)
without liberalizing factor markets (Naughton 1994). The result is highly inefficient and
distorted labor, land, and capital markets throughout the whole economy, but even more so
in the rural sector.
Although the economic reform started in the countryside with the contract
responsibility system, the uneven development of the factor markets has hindered the
development in the rural areas and exacerbated the income inequality. In a study of
income inequality in rural China Benjamin and Brandt (1997) found that income inequality
was lower in villages with more active factor markets.
The rigidities in the labor market have hindered labor mobility and reduced the
number of economic opportunities available to rural residents. In the last decade changes
in migration-control have allowed very large labor flows but a dual system still exists and
results in far less benefits and subsidies for those workers.
The majority of the Chinese elderly, namely the rural elderly who had once held
high status in earlier agricultural societies by virtue of their control of scarce resources and
their knowledge of tradition, find themselves in a lower status in the process of
industrialization. This will add to the diverged disparities between the rural and the urban
elderly (Ji, 1997).
Though significant changes are occurring - such as increasing mobility of workers
- the factor markets are still ineffective, particularly in the rural areas, and may therefore
contribute to the growing income inequality.
5. Conclusion
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