Food price increases and the introduction of radical social welfare and enterprise reforms
during the 1990s generated significant changes in the lives of urban households in China.
Meng, Gregory, and Wang (2005) found in response that urban poverty increased considerably.
This paper uses household level data from 1986 to 2000 to examine what determines
whether a household falls below the poverty line over this period and investigates the quantitative
magnitude of the contributing factors which lead to the increase in poverty in the
mid 1990s. We find that large households and households with more non working members
are more likely to be poor, suggesting that perhaps the change from the old implicit price
subsidy to a explicit income subsidy for workers has worsened the position of large families.
Further investigation into the regional variation indicate that over the 1986-1993 period food
price increase is the main contributing factor to the increase in poverty, whereas between
1994 and 2000 the increase in inequality, non-food price, as well as the worsening of the
situation of the state sector employees contributed to the increase in poverty.