The cost of a growth miracle - reassessing price and poverty trends in China

China's economic development in recent decades has been tremendous, but also subject to debate. This paper uses Engel curves to identify price levels and real incomes that are comparable across both time and space. Based on these, new poverty trends are presented. We find that the urban and coastal areas that have experienced the fastest economic development have also seen smaller price increases than the poorer rural and inland areas. Our measures reveal that China has experienced substantial poverty reduction in a time with high economic growth, but compared to both the World Bank measures and those based on official CPI adjustments, our measures suggest a more moderate poverty reduction. Our findings imply that poverty was reduced by 40 and not 66 percent using the $1 dollar a day measure.