Income Inequality and Economic Development

The economic performance of Hong Kong has been phenomenal, and the good record has long been acknowledged throughout the world. Hong Kong has bootstrapped itself from the ranks of developing economies to be high on the list of the developed ones.

In comparison, changes in the population characteristics of Hong Kong have received much less attention. Due to the high degree of freedom both of emigration and immigration, to high life expectancy, and to low fertility — in part caused by economic development — there have been rapid changes in the size and structure of the population and the labour force. Yet, how many people in Hong Kong get to reap the harvest of its economic success? How much do they share? To appreciate Hong Kong's economic performance, we should not focus only on the total economic output; we should also know about the pattern of income distribution among the people.

As an economy undergoes drastic transformation, there are always people who are unable to adjust well or to adjust fast enough. They are left in the lower end of income distribution and they feel more and more deprived (relative to other people). Under the current policy environment in Hong Kong, they are more ready than ever before to express their dissatisfaction, either directly or indirectly, in order to exert pressure on economic policy-making. Since personal interests are involved, it is quite often that discussions on income distribution are emotionally loaded.

However, when it comes to designing policies, it is imperative to avoid partiality and emotions as much as we can.

Income distribution is the outcome of interactions between factors of many dimensions: economic, sociological, educational, and political. It is no easy task to clearly delineate the causes and effects of income inequality. Unfortunately, a complicated matter like this tends to be condensed to some figures (such as the Gini coefficient), while discussions and even policy proposals are often based purely on such abstract figures. It is quite obvious that a lot of details could be missed.

What are the commonly used measures or indicators of income distribution. What kinds of scientific connotation do they carry? What is the current situation of income distribution in Hong Kong, as measured by such indicators. How has it changed over time. Have certain important government policies been able to bring about a more equal income distribution?

This book addresses these questions in detail, and the arguments are based on careful data analysis. The author, Dr. Hon-kwong Lui, first introduces the meaning and indicators of income distribution, and then describes the changing pattern of income distribution in Hong Kong as the economy develops. He also compares the income distribution of different sociological groups, such as male versus female employees, local residents versus immigrants from Mainland China, and public housing residents versus tenants in private housing.

As education and housing are the two most important items in the list of government expenditures, and since these two can have a bearing on income distribution, Dr. Lui carries out a quantitative analysis of an important policy question: Whether and how education and housing policies may affect income distribution in Hong Kong.

Dr. Lui's main research interests include the labour market and income distribution in Hong Kong. He is familiar with handling massive amounts of detailed census data. His study contributes a lot to our understanding of various aspects of Hong Kong's income distribution. The book is a good reference for the discussion and design of fiscal and related public polices.