Poverty and Vulnerability in Rural China: Effects of Taxation

This paper studies the impact of taxation on poverty and ex ante vulnerability of households in rural China based on national household survey data in 1988, 1995 and 2002. It has been confirmed that i) poverty and vulnerability have reduced significantly with a great deal of geographical disparity, ii) education, land, and access to infrastructure and irrigation facilities are among the key factors to reduce vulnerability, and iii) the highly regressive tax system increased farmer’s poverty and vulnerability. The abolishment of rural tax since 2006 would thus have a significant negative impact on both poverty and vulnerability of rural households. [Working Paper No. 156]