Individual Perceptions of Distributional Fairness in China

Abstract

In the wake of China’s enormous success transitioning to a market economy there is a widely held belief among researchers and policymakers that the country’s income distribution has become excessively unfair. Previous authors have argued ‘the perception of inequality is one of the key elements of the attitudes toward reforms’. We hypothesize that reform ‘winners’ (educated, high income, higher ranking Party officials) will express less dissatisfaction with the current income distribution and reform ‘losers’ (less educated, lower income, lower ranking Party members) will express greater dissatisfaction with the current income distribution. To test this hypothesis we use two unique data sets, the 2002 Chinese Household Income Project and the World Values Survey. We find that the perception of unfairness is highly correlated with actual or perceived income, current prospects, attitude toward corruption, and status of Party membership.

Appendix

Ordered logit specifications used in this paper

In this paper, we adopt a parsimonious logit specification and all the slope parameters are the same for different outcomes while each level of outcome is allowed to have a different intercept term. Suppose the unconditional probability of each outcome is denoted as p _k =Prob(outcome=k), k=1, 2, 3, then the logit specification is given by the following:

This specification assumes proportional odds, as the odds ratio of the outcome Y≤k is independent of the category k. The odds ratio is assumed to be constant for all categories.