Market Transition And Income Redistribution

This paper is concerned with the impact of the market-oriented reform on incomeredistribution among aged people in China. The market-oriented reform in the1990shas transformed the structure of the income from pension program to social insuranceprogram in order to release the burden of enterprises and make the market play its rolein the distribution of the retirement income. China’s change in income redistribution ofaged population provides a case to test some general arguments in transition theory suchas the transformation from the redistributive economic system to the market economicsystem is good to immediate producer rather than redistributors and is good to social,human, and cultural capital rather than political capital.To answer these questions, by using data from China General Social Surveythis paper divides aged people in urban China into two cohorts, receivingpensions and old age insurance, and compares these two cohorts’ incomestructure. Through the comparison, aged people’s political status and educationdo affect their income, especially political status functioning through workingunits. On one hand the income of direct producers is insignificant higher thanthat of indirect producers, on the other hand emerging industries begins to showhigher income return.This paper also argues that the market-oriented reform in old age insuranceprogram improves the income equality among genders, regions and differentdeveloping-level areas. Nonetheless, it reveals that this reform does not increaseaged people’ welfare because “pension-cohort” has more income increase than“insurance-cohort” from2003to2008.To sum up, the market transition in China did not change incomeredistribution mechanism completely. Human capital begins to show advantage,while political remains advantage in income return.