1998 Student-Faculty Fellows: St. Olaf College

Income Distribution in Shanghai:
Two Chinas in Transition From ‘Iron Rice Bowl’ to ‘Small Comforts’

Mentor: Xun Zhang Pomponio, Economics
Student: Paul Andrew Boruta, Economics, Chemistry, & Asian Studies, ’98

Project Abstract
Xun Zhang Pomponio

Our research for the 1998 ASIANetwork Freeman fellowship has focused on the topic of income inequality in Shanghai and its effects on economic growth in the region. Through our research we have sought to answer the questions: ‘Has the gap between the rich and poor increased as a result of Shanghai’s economic development?’ and ‘Is this inequality a significant obstacle to Shanghai’s continued economic development?’ The most substantial portion of our research was conducted this past June and July in Shanghai. During this time, we conducted interviews with Chinese economists and sociologists and searched local archives and in search of published income data. We also conducted individual interviews with workers and managers at state-owned, private, and joint-venture enterprises, and administered a self-designed survey to 148 workers at these enterprises. In addition, we traveled to Beijing to attend a conference of China’s social security reform and to Shanghai’s surrounding countryside and provinces to conduct comparative interviews and surveys.

Although our results are still a work in progress, we have been able to draw some preliminary conclusions from our research to date. We hope to expand on these conclusions as we continue our study throughout this next year, with the ultimate goal of publishing separate student and faculty papers to disseminate our findings. Our initial statistical analyses suggest that the income gap has indeed increased in Shanghai since the onset of economic reform, as evidenced by an increase in Shanghai’s Gini coefficient (a measure of a relative inequality in a society) from .016 in 1980 to .134 in 1996. Data from our survey elaborates further on this growing inequality by suggesting the presence of ‘hidden inequalities’ not evident in Shanghai’s published income data, such as inequalities between males and females, between different generations of workers, and between workers in coastal and inland regions. Generally, survey responses indicate that increasing income inequality is a serious concern among many Chinese people. Many people are angered by the fact that much of the wealth in Shanghai has been acquired through illegal means or through family connections. Others, particularly workers at China’s failing state-owned enterprises, are very concerned about unemployment and are disillusioned with the results of economic reform. But although there are pockets of resentment to Shanghai’s growing income inequality, most people seem to approve of the move to a merit-based economy where worker initiative is rewarded by monetary gains. Tentatively, this leads us to conclude that Shanghai’s growing inequality will not necessarily become an impediment to future growth and equality, particularly if China continues to implement reform in its critical institutions and works to prevent corruption in its economic system.

Paul Boruta

Conducting research this summer in China on an ASIANetwork-Freeman Fellowship was an exciting and rewarding experience. I learned much from working with Prof. Pomponio, not only from her broad knowledge of China’s economy but also from her personal experiences growing up and living in Shanghai. The process of conducting research ‘from scratch’ was both fun and exhausting, and the lessons learned from it will undoubtedly benefit me in my future research. The experience of living and traveling in China has left a lasting impression on me personally. I was rewarded time and again by the friendships I made with Chinese people during the course of our research. Having studied Chinese for almost eight years, I felt fortunate to have the opportunity to put my language skills to use and to cross cultural barriers in a country so different from my own.

My Chinese improved significantly as a result of listening and speaking in interview situations, and I even learned some of the local Shanghai dialect. Our research in China has also provided an excellent transition to my current academic endeavor as a Fulbright Scholar in Taiwan. Presently, I am continuing my study on income distribution at National Taiwan University in Taipei, and hope to eventually combine our findings from this summer in Shanghai with those obtained in Taiwan to compare the development experiences of the ‘two sides of the Straits.’