News - January 13, 2005

Urbanisation increases poverty in China

An enormous welfare gap is growing between urban and rural dwellers in China, and the large-scale migration towards the towns is making the gap wider. Villagers with no family in urban areas are becoming poorer as a result of rural depopulation.

Dr Marijke Kuiper devoted her PhD research to developing a new type of economic model that combines existing household-level models with regional models of villages, and this disturbing development is one of the conclusions she arrived at by applying the model. Her contribution is primarily in the area of methodology. Most existing models assume that all households react in the same way to urbanisation. Kuiper’s model on the other hand also takes into account that households that receive migrant earnings will react different to those that do not.

People living in a Chinese village who have family members in a town are likely to receive money from the migrant. Much of that money is used to buy livestock as this provides better returns than rice growing, although the investments required are higher. According to Kuiper’s model, villagers with no family members in urban areas become poorer. As rice production declines there is less demand for traction power, and it was precisely the poorer sections of the rural population that rented out their animal traction. As a result the gap between rich and poor within villages is growing. Kuiper thinks her model will have wider applications. / JT

Marijke Kuiper received her PhD on 7 January. Her promotor was Professor Arie van Kuyvenhoven of the Development Economics group.