The theme of this master project in sociology is to study the relationship between privatisation and income inequality in Western China. The main research theme is whether a higher degree of privatisation is related to greater income inequality. China has experienced massive economic growth in the reform period over the last 30 years. In the planned economy, the private sector was nearly non-existent, and the growth of the private sector has been a central factor in the transformation towards a market economy. The aim of the project is to investigate how this development has affected the wage structures in Western China in respect to income inequality.
In the reform period, millions of people have been lifted out of poverty and experienced improved living conditions. However, increased income inequality across many social dimensions has been following in the wake of the economic growth, and created new challenges and social problems. The Western region has been lagging behind in regards to development compared to the coastal provinces, and this regional dimension is important in relation to income inequality in China.
I use cross-sectional data from the Medow survey, which was conducted in 2004-2005 in 11 provinces in Western China. The survey was designed and carried out by Fafo, in cooperation with Chinese partners. Medow is the largest living condition survey that has been conducted in Western China, and has data on both household and individual level on a wide range of topics. I use multilevel analysis to study both individual and structural aspects in relation to income inequality.
The level of income inequality in a society is influenced by many factors. I chose to focus on five social structures - education, sector, occupation, urban-rural diversity, and migration, and how these social structures affect income inequality, in relation to the process of privatisation. I draw on a range of theoretical perspectives, to frame how privatisation can influence the five social structures, with further consequences for income inequality. I employ neoclassical economic theory with an emphasis on human capital and market mechanisms related to the labour market, market transition theory with a focus on transitional China and increased returns to education, segmented labour market theory which directs attention to the diversified occupational structure, social closure approach with an emphasis on social categories that establishes boundaries and inequality, and neo-Marxism/Structuralism which is related to uneven regional development and migration issues. In general, the main findings confirm that a higher level of privatisation co-exists with greater income inequality between different social groups in Western China. Prefectures with more privatisation tend to have increased income distance between individuals with different educational attainment, between individuals working in the agricultural sector and other sectors, between different occupational positions, between urban and rural citizens, and between migrants and residents. However, income differences between individuals in the state and private sector are found to decline in prefectures with a higher degree of privatisation.
There has been much research on income inequality in China within sociology and economy, but less attention has been given to study this in the context of the Western region. There has also been less focus on the relationship between privatisation and income inequality. My study has both an empirical and theoretical purpose. Empirically, my findings challenge the simplistic view that market economic reforms promote equality through development and the “trickle-down” effect of economic growth to wide segments of the population. I show that privatisation in itself not necessarily contributes to increased equality, but can be seen to maintain and create income inequality. Theoretically, the study contributes with a critical discussion of boundaries and processes of social exclusion in the Chinese labour market, and how they are affected by privatisation in the developing market economy. I discuss how different social groups such as peasants, rural migrants, people with low education and low occupational positions have limited possibilities to improve their life chances. An important implication is that the social boundaries are often reinforced by the practice of and ideology behind privatisation.