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China's Income Distribution Over Time: Reasons for Rising Inequality

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  • Wu, Ximing
  • Perloff, Jeffrey M.
Abstract
We use a new method to estimate China’s income distributions using publicly available interval summary statistics from China’s largest national household survey. We examine rural, urban, and overall income distributions for each year from 1985-2001. By estimating the entire distributions, we can show how the distributions change directly as well as examine trends in traditional welfare indices such as the Gini. We find that inequality has increased substantially in both rural and urban areas. Using an inter-temporal decomposition of aggregate inequality, we determine that increases in inequality within the rural and urban sectors and the growing gap in rural and urban incomes have been equally responsible for the growth in overall inequality over the last two decades. However, the rural-urban income gap has played an increasingly important role in recent years. In contrast, only the growth of inequality within rural and urban areas is responsible for the increase in inequality in the United States, where the overall inequality is close to that of China. We also show that urban consumption inequality (which may be a better indicator of economic well-being than income inequality) rose considerably.
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Suggested Citation

  • Wu, Ximing & Perloff, Jeffrey M., 2004. "China's Income Distribution Over Time: Reasons for Rising Inequality," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9jw2v939, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt9jw2v939
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    Cited by:

    1. Wu, Ximing & Perloff, Jeffrey M., 2005. "GMM Estimation of a Maximum Distribution With Interval Data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7jf5w1ht, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Zhongwei Zhao, 2006. "Income Inequality, Unequal Health Care Access, and Mortality in China," Population and Development Review, The Population Council, Inc., vol. 32(3), pages 461-483, September.
    3. Francesco Schettino & Alberto Gabriele, 2008. "Child malnutrition and mortality in China and Vietnam in a comparative perspective," Economic Change and Restructuring, Springer, vol. 41(1), pages 29-59, March.
    4. Ling, Davina C., 2009. "Do the Chinese "Keep up with the Jones"?: Implications of peer effects, growing economic disparities and relative deprivation on health outcomes among older adults in China," China Economic Review, Elsevier, vol. 20(1), pages 65-81, March.
    5. Khor, Niny & Pencavel, John, 2008. "Measuring Income Mobility, Income Inequality, and Social Welfare for Households of the People’s Republic of China," ADB Economics Working Paper Series 145, Asian Development Bank.
    6. Mitra, Pradeep & Yemtsov, Ruslan, 2006. "Increasing inequality in transition economies : is there more to come?," Policy Research Working Paper Series 4007, The World Bank.
    7. Gu, Xinhua & Tam, Pui Sun, 2013. "The saving–growth–inequality triangle in China," Economic Modelling, Elsevier, vol. 33(C), pages 850-857.
    8. Broich, T. & Szirmai, A., 2014. "China's economic embrace of Africa: An international comparative perspective," MERIT Working Papers 2014-049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Staley, Mark, 2018. "The Knowledge-Diffusion Bottleneck in Economic Growth and Development," MPRA Paper 87255, University Library of Munich, Germany.
    10. Alberto, Gabriele & Schettino, Francesco, 2006. "Child Mortality In China And Vietnam In A Comparative Perspective," MPRA Paper 3987, University Library of Munich, Germany, revised Dec 2006.
    11. Dong, Xiao-Ying & Hao, Yu, 2018. "Would income inequality affect electricity consumption? Evidence from China," Energy, Elsevier, vol. 142(C), pages 215-227.
    12. Long KE, 2015. "A Study on China fs Social Safety Institution and Income Disparity," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 11(1), pages 205-230, March.
    13. Coes, Donald V., 2008. "Income distribution trends in Brazil and China: Evaluating absolute and relative economic growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 359-369, May.
    14. James K. Galbraith & Ludmila Krytynskaia & Qifei Wang, 2004. "The Experience of Rising Inequality in Russia and China during the Transition," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(1), pages 87-106, June.
    15. Qin Gao, 2006. "Social Benefits in Urban China: Determinants and Impact on Income Inequality in 1988 and 2002," WIDER Working Paper Series RP2006-117, World Institute for Development Economic Research (UNU-WIDER).

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