In this paper we examine poverty concentration in Chinese impoverished neighbourhoods and estimate the effects of household characteristics and neighbourhood types on social deprivation. We find that unemployed households in old neighbourhoods are among the most deprived. The Chinese case suggests that urban poverty is concentrated by particular social groups living in specific neighbourhoods. We find a small but not insignificant neighbourhood effect on poverty generation in China. Living in impoverished neighbourhoods increases the probability of becoming poor by a steady percentage. For every 1% increase in poverty rate, the chance is raised by 4.4%. Living in old neighbourhoods and being unemployed raises the chance by 4.7 times with demographic and socioeconomic attributes controlled for. The neighbourhood effect in the Chinese case is linked to path dependency of institutionally derived inequalities.
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