Do China's people favour redistribution? Evidence from an incentivized experiment

• Author: Liangjun Wang,Tai‐Sen He,Louis Putterman
• DOI: http://doi.org/10.1111/1468-0106.12289
• Date: 01 May 2019
• Published date: 01 May 2019

ORIGINAL MANUSCRIPT

Do China’s people favour redistribution?

Evidence from an incentivized experiment

Tai-Sen He

1

| Louis Putterman

2

| Liangjun Wang

3

1

Division of Economics, School of Social

Sciences, Nanyang Technological University,

Singapore

2

Department of Economics, Brown University,

Providence, Rhode Island

3

School of Economics and Management, Zhejiang

University of Technology, Hangzhou, China

Correspondence

Louis Putterman, Department of Economics, Box

B, Brown University, Providence, RI 02912, USA.

Email: louis_putterman@brown.edu

Abstract

From 1949, China’s leaders brought their country through

three decades of income and wealth compression, which

was followed by more than three decades of sharply rising

inequality. What preferences do China’s people hold

regarding what price (if any) is worth paying for greater

equality? We conduct a laboratory decision-making exper-

iment mimicking aspects of a macro-political–economic

environment, using Chinese undergraduate student sub-

jects. We find that our subjects have qualitatively similar

tastes for equality as their counterparts in parallel US and

European experiments; for example, most are willing to

sacrifice some payment for more equality of earnings

among other participants, and their willingness to do this

is stronger when inequalities originate randomly versus

based on performance. Considering the cases permitting

direct comparison between Chinese and US subjects’

choices, redistributive choices tend to be a bit higher in

China if the participant pays no direct cost and a bit lower

if he or she pays such a cost, but the two distributions of

decisions differ significantly in under 14% of conditions.

Survey data too suggests preferences for a more equal

income distribution in China than in other East Asian

countries, suggesting a possible impact of the Chinese

Communist Party dominance in education and media.

1|INTRODUCTION: HISTORICAL BACKGROUND AND

INTERNATIONAL SURVEY DATA

Dramatic attempts to alter the distribution of income and wealth, either as a goal in its own right or as

a by-product of other goals, have been made in mainland China since 1949. Communist parties

worldwide have shared egalitarian agendas, influenced by Marxist ideas. Schematizations of

Received: 19 July 2017 Revised: 29 July 2018 Accepted: 11 November 2018

DOI: 10.1111/1468-0106.12289

Pac Econ Rev. 2019;24:293–324. wileyonlinelibrary.com/journal/paer © 2019 John Wiley & Sons Australia, Ltd 293

Marxism suggest a proximate goal of eliminating income inequalities from owning natural and pro-

duced means of production, and an ultimate goal of eliminating all inequalities, or at least all of those

not associated with objective needs.

1

China’s course with respect to such goals differed from that of

the Soviet Union and its allies, however. From the accession of the Chinese Communist Party (CCP)

to power in 1949 until the achievement of paramountcy by that Party’s pragmatic or reformist faction

led by Deng Xiaoping in late 1978, the ideal of “to each according to his labor”(Ben-Ner, Montias, &

Neuberger, 1994; Kohler, 1989; Marx, 1978 [1875]) competed for influence with the more egalitarian

“to each according to his needs”ideal which Mao Zedong and leftist allies appeared to value.

2

Then, from the end of the 1970s, the CCP’s reform wing worked to convince cadres and the

populace that Mao and allies had committed egalitarian excesses and had promoted policies at

odds with China’s need to emphasize economic construction. Leftist egalitarianism was criticized

as being at odds with Marxist orthodoxy; that is, with the official position in both the Soviet Bloc

(and of China itself in less leftist moments

3

) that the initial or “socialist”stage must precede the

higher or “communist”one. In the 1980s and 1990s especially, a succession of CCP leaderships

tried not only to strengthen the emphasis on work incentives, including the restoration of returns

to human capital, but also to open space for rewards from entrepreneurship (Brandt & Rawski,

2008; Naughton, 2006).

In line with these policy swings, China went from having one of the world’s most equal distribu-

tions of income, with a Gini coefficient of around 0.3 and next to no legally recognized private

wealth, in 1978,

4

to having a rather unequal distribution of income, marked by a Gini coefficient as

high as 0.50 in 2010.

5

Accompanying inequalities of wealth were higher still, with Forbes Magazine

asserting that China had 400 billionaires or billionaire families in April 2015 (Flann ery, Chen, Yan-

jie, Xiong, & Eronen, 2015), while a study by Xie and Jin (2015) concluded that the bottom 50%

(75%) of households owned less than 7.5% (21.2%) of household wealth.

By the middle of the 2000s, as inequality continued to rise and wealthy business elites were being

admitted to CommunistParty membership, official rhetoric had againbegun to reflect concern for inter-

regional and other inequalities, elevating “harmonious society”to the status of a leading slogan, imply-

ing that not leaving the poor too far behind was part of the meaning of that phrase, boosting efforts to

aid poorer provinces, and publicizing efforts to fight the ill-gotten gains attributed to corruption.

Few would argue that either the CCP’s early egalitarian bent or its later campaign for toleration

of inequality were directly driven by popular demand. However, what do China’s people think about

inequality? During both the egalitarian Mao era and the inequality-accepting reform era, there was lit-

tle polling of ordinary Chinese to learn their views about inequality. Western social scientists often

asserted that the Communist Party had gained popularity with much of China’s then majority rural

population by redistributing considerable amounts of land to poor peasants in the late 1940s and early

1950s. However, few social scientists viewed China’s industrialization strategy as truly pro-peasant,

once its realities began to be better known after 1978.

6

De-collectivization and relaxing of controls

on agricultural sales and non-farm activities were by all accounts popular with rural dwellers, and the

improvement of food availability and quality, soon followed by higher wages and a flood of con-

sumer goods, also gained urban dwellers’appreciation, although concerns about inflation and the

unfair access to profit opportunities by those with ties to party cadres also grew. Some observers (see

e.g. Whyte, 2010) contend that the great majority of Chinese have found the rising inequalities of the

reform era quite tolerable, given their accompaniment by widespread economic growth, but others

suggest limits to this tolerance, particularly in view of the frequent association of high incomes with

corruption and political connections.

294 HE ET AL.

1.1 |Evidence from surveys

Since 2005, several thousand Chinese citizens have been randomly sampled and included in multiple

rounds of the World Values Survey, a survey also conducted in more than 60 countries during that

period.

7

Two of the questions included are potentially helpful for understanding Chinese views on

inequality, although the conclusions that can be drawn from them remain somewhat imprecise. First,

survey respondents were asked to position their views on a scale ranging from “incomes should be

made more equal”(which we label as 10) to “we need larger income differences as incentives for

individual effort”(which we label as 1).

8

Second, they were asked for their views about the govern-

ment’s role in assuring the economic provisioning of individuals, choosing a number between 10 for

the “government should take more responsibility to ensure that everyone is provided for”to 1 for

“people should take more responsibility to provide for themselves”. On the first, general question on

inequality, Chinese respondents had an average score of 5.98, indistinguishable from the average for

Western European respondents and higher than that of respondents in the United States, Canada,

Australia and New Zealand (5.44), and higher still than those in Taiwan, Hong Kong, South Korea

and Japan (average of 5.05). The fact that mainland Chinese appeared to favour equality considerably

more than other East Asians, including fellow ethnic Chinese in Taiwan and Hong Kong, makes it

difficult to argue that Communist rule has, if anything, had a net negative impact as a sort of backlash

against egalitarianism. Nor can one assert that it is only the continued relative poverty of many Chi-

nese compared to most South Koreans, Japanese or Taiwan residents that accounts for the greater

interest in equality or the relative absence of economic conservatism among Chinese respondents. In

regression estimates using more than 120 000 WVS responses from 69 countries, we find the average

preference for equality based on responses to the same WVS question to be slightly higher in South

Asia than in the East Asian countries minus China, and substantially lower still in South-East Asia

and sub-Saharan Africa, two of these areas having substantially lower average incomes than China.

9

Interestingly, the region dummy variables for the two other regions in which Communist parties ruled

in the second half of the 20th century (Eastern Europe and Central Asia) are either smaller than

China’s, or indistinguishable from zero; therefore, if high preference for equality is in part attributable

to China’s history of communism, the system seems rather less successful in instilling such prefer-

ence in other regions.

10

A parallel analysis of responses to the second question, that on government responsibility, obtains

results that are similar insofar as they indicate a high demand for a government role, in China. In par-

ticular, agreement that it is the government’s responsibility to take care of people’s needs is much

higher in China than in the USA, and in this case even somewhat higher in China than in the Western

European countries as a group. However, China is in this instance no outlier among developing coun-

tries: responses are on average quite similar in South Asia, Latin America and Caribbean, and sub-

Saharan Africa. Moreover, in sharp contrast to the responses on the desirability of equality question,

views that government has a responsibility to take care of people’s needs are even stronger on aver-

age in South Korea, Japan, Taiwan and Hong Kong than in China. Preference for government respon-

sibility is also higher in the other two formerly-communist regions, Eastern Europe and Central Asia,

than in China.

11

Thus, views about governmental responsibility for economic well-being are not

highly correlated (from a cross-country standpoint) with views about desirability of equality, and in

the case of East Asia, the widespread belief in major state responsibility may result from the shared

“developmental state”approach of the past half century and more. The somewhat lower value for

China than for its East Asian neighbours may, in turn, reflect, perhaps, government campaigns about

personal responsibility that began with messages about “breaking the iron rice bowl”in the 1980s

and were further strengthened in conjunction with massive state sector layoffs in the late 1990s.

HE ET AL.295