Dissecting the provincial relative poverty dynamics in China: a new four-dimensional decomposition approach

Purpose This study investigates relative poverty in China against its rapid economic growth and poverty reduction efforts, aiming to understand the impact of evolving poverty lines and rural-urban disparities. Design/methodology/approach Utilizing micro-survey data and a novel four-dimensional decomposition method, the research decomposes provincial relative poverty changes in China into poverty line and income distribution effects. The poverty line effect is further broken down into the extensive and intensive components, and the impact of income distribution into the growth and inequality effects, offering a detailed examination of their roles in urban and rural contexts. Findings The findings indicate that economic growth significantly mitigates the incidence, depth and severity of relative poverty across both settings, whereas income inequality exacerbates these aspects. Additionally, changes in the poverty line through the extensive and intensive effects markedly elevate relative poverty levels. Despite overall reductions, rural areas continue to face higher poverty rates than urban regions, emphasizing the necessity for targeted poverty alleviation policies. Originality/value This paper provides a novel perspective by dissecting China’s relative poverty dynamics through a four-dimensional analysis, highlighting the importance of considering economic growth, income inequality and the poverty line adjustments. It underlines the need for policies that specifically address the nuances of relative poverty, including the persistent rural-urban divide, contributing valuable insights for more effective poverty alleviation strategies.