Social Sciences in China (Chinese Edition)

No.10, 2018

The Redistributive Effect of Government Subsidies

(Abstract)

Xu Jing, Cai Meng and Yue Ximing

Using the path curve of the Gini coefficient of total income formed by the increase in subsidies simultaneously with the curve of the minimum Gini coefficient enables us to provide a comprehensive examination of the effect of the government’s income redistribution policy that measures the effect of subsidies and compensates for the methodological defects in the previous MT index and Gini coefficient decomposition. The findings of this new measurement methodology show that China’s social security expenditure can narrow the income gap, but the redistribution is not efficient enough; the turning point of the Gini coefficient path curve has been exceeded, so that subsidies are “overallocated” to some people. Adjustments to the distribution of subsidies can further reduce the Gini coefficient of residents’ total income.