TY - JOUR

T1 - Towards a utilitarian social welfare function-income inequality and national welfare growth in China

AU - Wang, Songtao

AU - Li, Bin

AU - Kenderdine, Tristan

PY - 2019

Y1 - 2019

N2 - Since the beginning of the reform period, China's income inequality has increased. However, loss of national welfare and the impact of income inequality on the growth of national welfare has not been adequately assessed. The result is that any development model myopically focusing on efficiency and ignoring equality cannot maximize growth in national welfare. Grounded in utilitarian theory, this paper builds a national welfare function which incorporates the Gini coefficient and demonstrates the negative effects of income inequality on China's national welfare. We then provide a welfare-loss formula of income inequality and another formula to calculate the influence of income inequality change on national welfare growth. Our calculations show that from 1996 to 2010, the average welfare-loss rate of China's residents' income inequality was 8.08%, with absolute welfare loss increasing1.44 times; while the relative impact of Gini coefficient increases on national welfare growth was (-) 8.66%.

AB - Since the beginning of the reform period, China's income inequality has increased. However, loss of national welfare and the impact of income inequality on the growth of national welfare has not been adequately assessed. The result is that any development model myopically focusing on efficiency and ignoring equality cannot maximize growth in national welfare. Grounded in utilitarian theory, this paper builds a national welfare function which incorporates the Gini coefficient and demonstrates the negative effects of income inequality on China's national welfare. We then provide a welfare-loss formula of income inequality and another formula to calculate the influence of income inequality change on national welfare growth. Our calculations show that from 1996 to 2010, the average welfare-loss rate of China's residents' income inequality was 8.08%, with absolute welfare loss increasing1.44 times; while the relative impact of Gini coefficient increases on national welfare growth was (-) 8.66%.

U2 - 10.5430/RWE.V10N3P344

DO - 10.5430/RWE.V10N3P344

M3 - Article

VL - 10

SP - -

JO - Research in World Economy

JF - Research in World Economy

SN - 1923-3981

IS - 3

ER -