Multidimensional Poverty and Wellbeing in China Through the Multidimensional Synthesis of Indicators (MSI)

Recently the topic of multidimensional poverty in China has drawn the attention of many scholars discussing the China’s Path to the New Era. The main goal of this paper is to measure China’s achievements in terms of multidimensional wellbeing and poverty in 1989 and 2011. We are interested in measuring and comparing its distribution among different groups (based on geography and socio-economic conditions). The main originality of this paper is the use of the Multidimensional Synthesis of Indicators (MSI) (a new class of indexes Mauro et al. 2016, 2017) which is applied for the first time using individual level (microdata) and for the first time to China. For the sake of completeness, we computed also the Multidimensional Poverty Index (MPI) a well-established multidimensional index). In this way we also want to see whether these two poverty measurements are overlapping or not, and in case what triggers the differences. Poverty alleviation has been an impressive outcome of the reform programs China launched in 1978. According to the Millennium Development Goals report, between 1970 and 2000 the number of rural Chinese population without food and clothing decreased from 250 million (30.7% of the total rural population) to 32 million (3.5%). Equally impressive is the drop in monetary poverty: according to the World Bank data, the proportion of poor people drop from 66.6% in 1990 to 7.9% in 2011. Despite these achievements, the fight against poverty in China remains a target priority, now related to the Sustainable Development Goals (SDGs) and to the 13th Five-Years Plan, which announced the willingness of eradicating poverty from China. The commitment of the government in poverty alleviation involves monetary subsidies (the 低 保 “DiBao” program) as well as medical insurances schemes and education subsidies. On the other hand, especially between 1984 and 2003, Chinese reforms were “unbalanced”: the resources were allocated with a bias toward urban and coastal areas, and the central government reduced its commitment to provide social security. Poverty is not only a matter of money shortage. This fact is nowadays widely recognized by economists. The same SDGs formulation states that “Poverty is more than the lack of income and resources to ensure a sustainable livelihood”. Indeed, allowing people to satisfy their needs in terms of health, education, social security etc. is an essential aspect of poverty mitigation. This is even more true in China, where the fast GDP growth recorded in the last decade will not be feasible in the future (the so-called “New Normal”). Please do not circulate without permission and please do not quote 2 Most of the recent papers on multidimensional poverty in China adopt the MPI (Alkire and Foster 2011), sometimes with slight changes in the methodology or in the dimensions considered. The MPI applies a double cutoff to a set of poverty indicators to determine how many households are multidimensionally poor and how many deprivations they suffer. Each of these cutoffs, necessary to compute the MPI, implies a loss of information. Moreover, the traditional MPI specification allows to calculate poverty only at household level, without differentiation between genders or age groups. This paper enriches the literature in a threefold way. Firstly, the multidimensional wellbeing and poverty in China is studied by applying in this context for the first time the Multidimensional Synthesis Indicator (MSI), a multidimensional index proposed by Mauro, Biggeri and Maggino (2016, 2017). Secondly, this paper applies for the first time the MSI technique to micro-data, exploiting its capacity of penalizing the acute deprivation at individual level. Finally, we created an original version of the MSI by modifying its underlying equation to address the issue of the role of income in multidimensional wellbeing. The empirical analysis is based on individual-level data from the China Household and Nutrition Survey (CHNS). The CHNS sample is randomly selected to include about 4,400 households spread over nine provinces (plus three municipal cities) and nine years. The first survey round was carried out in 1989, the last in 2011. The questionnaires investigate several aspects of wellbeing, including the data necessary to replicate the MPI and other information that we considered in the MSI. The aim of the MSI is to synthetize different information relative to various dimensions of wellbeing in a single index. With this index, we can penalize more the heterogeneity in cases of poorer households, whose coping strategies are likely to be more limited. After synthetizing our information, we used the MSI to investigate the level of poverty over time, across provinces and across different socio-economic groups. We included 8 dimensions in the MSI. To reduce as much as possible the arbitrariness in the choice of the indicators, we referred to the BMI, the HDI, the Capability Approach (Nussbaum, 2011) and the MPI itself. The dimensions considered thus are: Health, Education, Nutrition, Housing, Sanitation, Work, Free Time, Assets. Income, deliberately excluded from the eight dimensions, is included in the formula to calibrate the heterogeneity penalization (the poorer the family, the higher the penalization). This derives from the assumption that richer families are more able to cope with a shock in a single dimension. The paper is structured into six sections. The first section introduce the paper aims and structure. The second section presents the literature and trends of Chinese poverty and wellbeing in the last 30 years. Then, the third section presents the the MSI and the MPI and their properties. Section fourth presents the data. Section fifth presents the main results, while in section sixth the discussion and main conclusions are given. Please do not circulate without permission and please do not quote