Identifying the Real Income Disparity in Prefecture-Level Cities in China: Measurement of Subnational Purchasing Power Parity Based on the Stochastic Approach

Round 1

Reviewer 1 Report

Great article and really consistent. Nice choice of statistical methods.

Author Response

Thank you for reviewing our article and thanks for your appreciation of our article.

Reviewer 2 Report

The paper raises an important issue and proposes a new approach to assessing income in regional terms. The method of calculation proposed by the authors is well thought out and justified. The authors aimed to combine known techniques and methods by eliminating the problem of missing data, which they succeeded in. Scientific soundness and a professional approach to computation give value to the elaboration. Methodology is explained with the detailes and it seems to be adequate, sufficient and complete. It contains reasonable strong theoretical foundations and correct own calculations (in addition attached as Appendix).

Some minor remarks:

1. In the paper comparing the nominal income it is measured as the average per capita for a prefecture-level city, and it is possible that there is an impact of the employment structure in a given region, e.g. more industrialized cities have more inhabitants employed as ordinary workers, while in other cities the professions that dominate may be more profitable. This fact can be equated with regional development, but the nature of the region (agricultural, industrialized, tourist) can have a big impact. This should be mentioned while comparing the differences in nominal income and real income is particular regions.

line 296 - there is an additional, unnecessary mark in the word "is"

 

 

Author Response

We would like to thank you for your valuable comments which have enabled us to produce an improved manuscript. Modifications have been made in the revised manuscript and are marked up using the “Track Changes” function in Microsoft Word. Responses to your comments are listed below.

 

Point 1: In the paper comparing the nominal income it is measured as the average per capita for a prefecture-level city, and it is possible that there is an impact of the employment structure in a given region, e.g. more industrialized cities have more inhabitants employed as ordinary workers, while in other cities the professions that dominate may be more profitable. This fact can be equated with regional development, but the nature of the region (agricultural, industrialized, tourist) can have a big impact. This should be mentioned while comparing the differences in nominal income and real income is particular regions.

Response 1: Thanks for your valuable comment. We are inspired greatly by your comment. The reasons for the differences in real income levels are analyzed in terms of industrial structure and the nature of the region. For example, in terms of industrial structure, tertiary industries such as tourism and restaurants dominate in the city such as Beijing and Shanghai, so the real income level in these cities is higher than in other manufacturing-dominated cities such as Shenyang and Harbin. Furthermore, considering the nature of the city, the real income level in tourist cities such as Beihai and Kunming is relatively higher than in their neighbouring cities. And we add these analyses to Pages 17, Lines 693-703.

 

Point 2: Line 296 - there is an additional, unnecessary mark in the word "is".

Response 2: Thanks for your valuable remarks. We have deleted the unnecessary mark in the word “is” in Pages 8, Line 419. And we have checked the full paper from stem to stem to make sure there are no such spelling errors.

Author Response File: Author Response.pdf

Reviewer 3 Report

I’m glad I had the opportunity to revise this interesting work, which aims at identifying the Real Income Disparity in Prefecture-Level Cities in China: Measurement of Subnational Purchasing Power Parity Based on Stochastic Approach. To do so, stochastic approach was performed. I think the investigated topic is timely and it would be interesting for the readers of this Journal and the adopted method is coherent with your aim. However, some major revisions are required before publishing it.

First of all, according to Journal's guidelines, the abstract should be structured and emphasize your work’s aim first and better. Moreover, the theoretical and practical implications of your work should be very clear when reading the Abstract, but I cannot revise them at the moment.
Secondly, I revise the same issues in the Introduction, which will need great work to be improved. In particular, I suggest adopting a commonly used scheme, structuring this section as follows:
•       Broad theme or topic;
•       Academic and practical importance;
•       Literature summary;
•       Gaps, inconsistencies, controversies to be addressed;
•       Focus of the study and research question(s), here or in Section 2;
•       Applied methods;
•       Main results and contributions;
•       Structure of the article (remainder).

At the moment, some of these parts are a little bit vague (i.e., theoretical and practical relevance, research gap) or missing (i.e., paper’s main results and implications, remainder). Moreover, you should try to better position your paper into the current scientific debate. In this sense, take particular care also to avoid supporting recent trends without references. For instance; you have mentioned that "Another contribution of the paper is measuring subnational PPPs in China at the pre- fectural city level. As compared to most existing studies that only analyze subnational PPPs at the provincial level in China, where commodity prices in provinces are mostly collected in the more developed provincial capitals and are not representative of the general level of the province. Therefore, the findings of this paper are more general and the sample size of the city-level measurement study is larger, making it more suitable for further research. Meanwhile, in terms of the data used, the paper selects more than 10,000 price collection points in 76 prefecture-level cities in China, collects data on the prices of 232 specification commodities, and assesses the quality of the data in an attempt that survey price levels can better reflect the actual situation in China, and thus measures subnational PPPs and analyses the real income disparities in 76 prefecture-level cities in China'. My query is thay justify the statements as you have seriously research gap. I also suggest providing a brief explanation of what  is Identifying the Real Income Disparity in Prefecture-Level Cities in China: Measurement of Subnational Purchasing Power Parity Based on Stochastic Approach and does since the Introduction to help international readers contextualizing your analysis and generalizing its results.

Considering Section Introduction, I suggest mobilizing part of those concepts in the other paragraphs of the literature review since I cannot revise any great value added by this section. 

Regarding the Materials and Methods, I think that a better justification for investigating PPP should be provided. What distinctive elements make its investigation interesting? Why did you choose the particular methodology? What novel insights can be derived from such analysis? Then, some lines dedicated to describing the advantages of adopting a Stochastic Approach should be added.

I suggest also giving more attention to developing the discussion of your results, trying to better link it to the current scientific debate and the literature leveraged in Section 1. Reading this paragraph, I still cannot capture the distinctive supporting elements that support and justify the relevance of your study. Similarly, the theoretical and practical implications of your work, as well as possible further developments, should be added in the Conclusion paragraph. 

Good luck! 

Thank you 

Author Response

We would like to thank you for your constructive comments which have enabled us to produce a significantly improved manuscript. Modifications have been made to several sections in the revised manuscript and are marked up using the “Track Changes” function in Microsoft Word. Responses to your comments are listed below.

 

Point 1: First of all, according to Journal's guidelines, the abstract should be structured and emphasize your work’s aim first and better. Moreover, the theoretical and practical implications of your work should be very clear when reading the Abstract, but I cannot revise them at the moment.

Response 1: We really appreciate your comments. We have made some modifications to the Abstract. Our work’s topic and aim were presented first. Then we briefly described the result of the manuscript and reveal the theoretical and practical relevance. Please see changes in Page 1 Lines 9-23 or see the Abstract presented below.

Abstract: Common prosperity has become the consensus of the development of the times. This study aims to establish a generalized framework of the multilateral index number system under the stochastic approach and further derive the Geary-Khamis(GK) system and the Rao system under stochastic approach to measure subnational Purchasing Power Parities (PPPs) for quantifying the real income disparity excluding the effect of prices in prefecture-level cities in China accurately. The results revealed that: 1) The GK system and the Rao system under stochastic approach have advantages in addressing information loss and reliability measures and further improve the spatial price index theory; 2) The distribution of price levels in China is in line with the trend of decreasing economic levels from east to west, which may be related to the Penn effect; 3) Compared with nominal income, the real income increased significantly, and the ratio of the highest to the lowest real income in China decreased from 2.62 to 2.02. Real income excluding the effect of prices showed a new characteristic of moving towards the north for the high-income agglomeration areas and towards the southwest for the low-income agglomeration areas. These findings are conducive to the adoption of regionally differentiated measures to promote the realization of common prosperity which has significant practical relevance.

 

Point 2: Secondly, I revise the same issues in the Introduction, which will need great work to be improved. In particular, I suggest adopting a commonly used scheme, structuring this section as follows:

• Broad theme or topic;
• Academic and practical importance;
• Literature summary;
• Gaps, inconsistencies, controversies to be addressed;
• Focus of the study and research question(s), here or in Section 2;
• Applied methods;
• Main results and contributions;
• Structure of the article (remainder).

At the moment, some of these parts are a little bit vague (i.e., theoretical and practical relevance, research gap) or missing (i.e., paper’s main results and implications, remainder).

Response 2: Thanks for your valuable comment about the Introduction structure. We have made careful modifications according to the scheme. Firstly, we introduced the research background and the topic in the first and second paragraphs and the theoretical and practical importance is given in the second paragraph. Then, we conducted a literature review about the income disparity in China and the measurement method of PPPs and summarized the problems of existing studies in the third and fourth paragraphs. In the fifth and sixth paragraph, the contribution of the paper and the main result was presented. Finally, the remainder of the paper was laid out in the last paragraph of the Introduction. Please see changes in Page 1-3 Lines 28-216.

In response to your comment that some of these parts are a little bit vague (i.e., theoretical and practical relevance, research gap) or missing (i.e., paper’s main results and implications, remainder), we have thought carefully and made the following changes. (1) In terms of theoretical and practical relevance, this paper improved the existing measurement method of PPPs and developed a generalized framework for the multilateral comparative index system under the stochastic approach, thus promoting the development of the spatial index theory and having theoretical relevance. Furthermore, by measuring the PPPs in China which represent the price level, and excluding the effect of inter-regional price differences, the real income level of each city and the real income disparity between cities are accurately quantified. A full understanding of how large the income disparity is in China is conducive to the adoption of regionally differentiated measures to promote the realization of common prosperity which has significant practical relevance. We provide a brief description in the second paragraph of the Introduction(Lines 74-79) and present the theoretical and practical relevance of the study in detail in the last section of this paper(Lines 758-760; Lines 777-780). (2) We summarize the issues in existing research at the bottom of the third paragraph and in the first sentence of the fourth paragraph of the Introduction. (3) In terms of the paper’s main results, we presented the main results in the sixth paragraph of the Introduction, Lines 207-210. (4) We listed the remainder of the paper in the last section of the Introduction, Lines 211-216.

 

Point 3: Moreover, you should try to better position your paper into the current scientific debate. In this sense, take particular care also to avoid supporting recent trends without references. For instance; you have mentioned that “Another contribution of the paper is measuring subnational PPPs in China at the prefectural city level. As compared to most existing studies that only analyze subnational PPPs at the provincial level in China, where commodity prices in provinces are mostly collected in the more developed provincial capitals and are not representative of the general level of the province. Therefore, the findings of this paper are more general and the sample size of the city-level measurement study is larger, making it more suitable for further research. Meanwhile, in terms of the data used, the paper selects more than 10,000 price collection points in 76 prefecture-level cities in China, collects data on the prices of 232 specification commodities, and assesses the quality of the data in an attempt that survey price levels can better reflect the actual situation in China, and thus measures subnational PPPs and analyses the real income disparities in 76 prefecture-level cities in China”. My query is thay justify the statements as you have seriously research gap.

Response 3: Thank you very much for pointing out the problem in the article and we have tried our best to avoid this problem. To support that most existing studies only analyze subnational PPPs at the provincial level in China and there is a lack of research in prefecture-level cities in China, we add the two latest literature in Page 3, Line 200. The literature added is listed below:

[1] Chen, M.; Wang, Y.; Rao, D. S. P., Measuring the spatial price differences in china with regional price parity methods. The World Economy 2020, 43 (4), 1103-1146.

[2] Biggeri, L.; Ferrari, G.; Zhao, Y., Estimating cross province and municipal city price level differences in China: Some experiments and results. Soc. Indic. Res. 2017, 131 (1), 169-187.

 

Point 4: I also suggest providing a brief explanation of what is Identifying the Real Income Disparity in Prefecture-Level Cities in China: Measurement of Subnational Purchasing Power Parity Based on Stochastic Approach and does since the Introduction to help international readers contextualizing your analysis and generalizing its results.

Response 4: Thanks for your valuable comment. A brief explanation was added in the second paragraph, Lines 75-78. And the explanation can be seen below.

Firstly, this paper improves the PPPs measurement method to accurately measure the price levels among prefecture-level cities in China. Further, by excluding the effect of inter-regional price differences, the real income level of each city and the real income disparity between cities are quantitatively analyzed.

 

Point 5: Considering Section Introduction, I suggest mobilizing part of those concepts in the other paragraphs of the literature review since I cannot revise any great value added by this section.

Response 5: We really appreciate your comments. We read and refined the literature review section in the fourth paragraph. Unnecessary concepts in the fourth paragraph were deleted. Please see changes in Page 2 Lines 99-119.

 

Point 6: Regarding the Materials and Methods, I think that a better justification for investigating PPP should be provided. What distinctive elements make its investigation interesting? Why did you choose the particular methodology? What novel insights can be derived from such analysis? Then, some lines dedicated to describing the advantages of adopting a Stochastic Approach should be added.

Response 6: Thanks for your valuable comment. We made some modifications according to your comment. Firstly, the justification for introducing PPP into our work and the reasons we choose the particular methodology were given in the first paragraph of the Methodology, Lines 218-226.

In terms of justification for investigating PPP, influenced by many factors such as resource endowment, location advantage, and consumption habits, there are objective differences in price levels among prefecture-level cities in China, resulting in nominal income not truly reflecting people's real living standards and real income disparity, so we introduce the PPP to measure the price levels and thus we can quantify the real income excluding the influence of price factors. Considering the drawback existing methods have, we choose this particular method to solve the problems that traditional methods have. Moreover, the most distinctive point of this method is estimating the accuracy of PPPs in China for the first time, and the most novelty insight of the practical analysis is that the results showed the real income disparity is not as large as the nominal data indicate, and the real income in China shows new distribution characteristics.

Then, we summarized the advantages of adopting this particular measurement method which can not also make use of the available price information to improve the estimation accuracy as far as possible, but also obtain heteroskedasticity robust standard errors to measure the degree of reliability of the measurement results so as to makes estimation results more credible, added these in Lines 284-288.

 

Point 7: I suggest also giving more attention to developing the discussion of your results, trying to better link it to the current scientific debate and the literature leveraged in Section 1. Reading this paragraph, I still cannot capture the distinctive supporting elements that support and justify the relevance of your study. Similarly, the theoretical and practical implications of your work, as well as possible further developments, should be added in the Conclusion paragraph.

Response 7: We really appreciate your comments. We modified the last section according to your valuable comments.

According to the literature reviewed in Section 1(Lines 99-104). It is obvious that the traditional methods for measuring PPPs have some shortcomings. We have made up for this deficiency as can be seen from the first conclusion in Lines 754-760. What’s more, due to the lack of current research on prefecture-level cities which is presented in Lines 96-98 we identified the subnational PPPs and real income disparity in the prefecture-level cities. The result and conclusion are presented in Lines 761-791. A full understanding of subnational PPPs and the income disparity is conducive to the adoption of regionally differentiated measures to promote the realization of common prosperity which has significant practical relevance.

Meanwhile, a detailed discussion of the results was given in the last section, and the theoretical and practical relevance are described in detail. Finally, some limitations and corresponding further work are added in the last paragraph. Please see changes in Page 18-19, Lines 751-810.

 

Author Response File: Author Response.pdf

Reviewer 4 Report

Title of the paper: Identifying the Real Income Disparity in Prefecture-Level Cities in China: Measurement of Subnational Purchasing Power Parity Based on Stochastic Approach

Manuscript Number: sustainability-1821778

General conclusion: Minor Revision.

 

Comments

After carefully reading the proposed paper, this paper contains an interesting proposal; my overall impression is that the manuscript presents some results that could be useful in practice. I have a good opinion about this work and recommend its acceptance after addressing the following aspects:

 

My comments are:

1.    In the Abstract and introduction, an abbreviation should not be mentioned without making it clear to the reader, please define this abbreviation “GK, PPP, OECD” before using it.  I notice that the authors have identified some of them, but not in their first use.

2.      The Abstract is very general. It is necessary to mention a brief description of the content of the manuscript in a clear and concise manner so that the reader can understand the content of the manuscript.

3.    No punctuation marks at the end of all equations in the manuscript, please correct these.

6.     In general, it is usual that the section of the introduction presents (in the following order) the topic, motivations of the work, bibliographical review, objectives, the novelty of the manuscript, and description of its sections, with no formulas, which can be moved to a section of background on the topic. This organization must be considered in the revised manuscript.

7. More information around Figures 1, 2, and 5 should be reported. Also, the quality of the Figures 1, 2, 3, and 5 is inferior, these figures must be saved in eps extension as Figure 4.

8. The authors should provide more details about the computational framework used in the manuscript. For example, software and packages used, features of the computer employed, runtimes, and other computational aspects must be added.

9. More information around Tables 1, and 2 should be reported.

 

10. The conclusions need to be improved. Then, I suggest titling the final section "Conclusions, limitations, and future research".

Comments for author File: Comments.pdf

Author Response

We would like to thank you for your constructive comments which have enabled us to produce a significantly improved manuscript. Modifications have been made to several sections in the revised manuscript and are marked up using the “Track Changes” function in Microsoft Word. Responses to your comments are listed below.

 

Point 1: In the Abstract and introduction, an abbreviation should not be mentioned without making it clear to the reader, please define this abbreviation “GK, PPP, OECD” before using it. I notice that the authors have identified some of them, but not in their first use.

Response 1: Thank you very much for pointing out the problems in the Abstract and introduction. These problems have been corrected, and we have checked the full paper from stem to stem to make sure there are no similar errors.

 

Point 2: The Abstract is very general. It is necessary to mention a brief description of the content of the manuscript in a clear and concise manner so that the reader can understand the content of the manuscript.

Response 2: Thanks for your valuable comment. We have made some modification to the Abstract. Our work’s topic and aim were presented first. Then we briefly described the result of the manuscript and reveal the theoretical and practical relevance. Please see changes in Page 1 Lines 9-23 or see the Abstract presented below.

Abstract: Common prosperity has become the consensus of the development of the times. This study aims to establish a generalized framework of the multilateral index number system under the stochastic approach and further derive the Geary-Khamis(GK) system and the Rao system under stochastic approach to measure subnational Purchasing Power Parities (PPPs) for quantifying the real income disparity excluding the effect of prices in prefecture-level cities in China accurately. The results revealed that: 1) The GK system and the Rao system under stochastic approach have advantages in addressing information loss and reliability measures and further improve the spatial price index theory; 2) The distribution of price levels in China is in line with the trend of decreasing economic levels from east to west, which may be related to the Penn effect; 3) Compared with nominal income, the real income increased significantly, and the ratio of the highest to the lowest real income in China decreased from 2.62 to 2.02. Real income excluding the effect of prices showed a new characteristic of moving towards the north for the high-income agglomeration areas and towards the southwest for the low-income agglomeration areas. These findings are conducive to the adoption of regionally differentiated measures to promote the realization of common prosperity which has significant practical relevance.

 

Point 3: No punctuation marks at the end of all equations in the manuscript, please correct these.

Response 3: Thank you very much for pointing out so many problems in the article. According to your opinion, these problems have been corrected, and we have checked the full paper from stem to stem to make sure there are no similar errors.

 

Point 6: In general, it is usual that the section of the introduction presents (in the following order) the topic, motivations of the work, bibliographical review, objectives, the novelty of the manuscript, and description of its sections, with no formulas, which can be moved to a section of background on the topic. This organization must be considered in the revised manuscript.

Response 6: Thanks for your valuable comment. We have made careful modifications according to your comment about the Introduction. Firstly, we introduced the research background the topic in the first paragraph and the motivation of the work is given in the second paragraph. Then, we conducted a bibliographical review about the income disparity in China and the measurement method of PPPs and summarized the problems of existing studies in the third and fourth paragraphs. In the fifth and sixth paragraphs, the novelty of the manuscript was presented. Finally, the remainder of the paper was laid out in the last paragraph of the Introduction. Please see changes in Page 1-3 Lines 28-216.

Point 7: More information around Figures 1, 2, and 5 should be reported. Also, the quality of Figures 1, 2, 3, and 5 is inferior, these figures must be saved in eps extension as Figure 4.

Response 7: Thank you very much for pointing out so many problems in the article. According to your opinion, Figures 1, 2, 3, and 5 have been changed into eps format and added to the revised manuscript.

Meanwhile, more detailed descriptions of Figures 1, 2, and 5 were presented. Firstly, we summarized the characteristic of the framework shown in Figure1, which is presented on Pages 3, Lines 235-248. Secondly, by observing the box plot in Figure 2, the distribution characteristic of 8 major categories among 76 prefecture-level cities were presented on Pages 14, Lines 611-617 Finally, we added the information about the distribution that can seen visually in Figure 5 on Pages 17, Lines 716-721.

 

Point 8: The authors should provide more details about the computational framework used in the manuscript. For example, software and packages used, features of the computer employed, runtimes, and other computational aspects must be added.

Response 8: We really appreciate your comments. All experiments of our study are carried out in RStudio(1.4.1717) and run on a PC with system configuration Intel(R) Core(TM) i5 CPU 2.00 GHz. Furthermore, we use the function written by ourselves to measure the PPPs in China instead of using the packages and the runtimes are 2.759 mins. We have added the above information to Pages 10, Lines 507-509.

 

Point 9: More information around Tables 1, and 2 should be reported.

Response 9: We really appreciate your comments. And we captured another possible influencing factor affecting the degree of reliability of PPPs estimates from Table 1 and add in Pages 13, Lines 577-582. Moreover, because our paper does not have Table 2, we guessed you are referring to Figure 2, and we made more detailed information about Figure2 in Pages 14, Lines 611-617.

 

Point 10: The conclusions need to be improved. Then, I suggest titling the final section "Conclusions, limitations, and future research".

Response 10: Thanks for your valuable comment. We made the modification according to your suggestions. Firstly, we improved our conclusions, and meanwhile, analyzed the corresponding relevance of our work. Secondly, some limitations such as data accessibility and ignorance of price influencing factors. Finally, we listed the possible future work according to the limitation. Please see changes in Page 18-19, Lines 739-810.

Author Response File: Author Response.pdf