The trend of the Gini coefficient of China

Jiandong Chen, Dai Dai, Ming Pu, Wenxuan Hou and Qiaobin Feng

Global Development Institute Working Paper Series from GDI, The University of Manchester

Abstract: A literature review indicates that the main problem in calculating the Gini coefficient of Chinese residents’ income is the shortcomings of the data sources. Though many studies have tried to overcome these limitations through decomposing the nationwide Gini ratio by urban and rural areas, the final results have been underestimated, due to the overlap term or residual in the decomposition. This paper analyses the effects of the overlap term on calculating the overall Gini coefficient through a statistical approach, and estimates Chinese Gini ratios since economic reform and open door policies were adopted. Based on decomposing the Chinese Gini coefficient from 1978 to 2006, the authors find that the key factor of income inequality comes from income disparity between rural and urban inhabitants. The authors investigate the features of this income inequality between rural and urban areas. Furthermore, statistical approaches are employed to evaluate the effects of the development of urbanisation and rural-to-urban average income on the income inequality of the whole nation. The results show that accelerating the pace of urbanisation is the key issue to improving Chinese income disparity. On the basis of the above analysis, the paper proposes related policies for policy-makers.

Date: 2010
New Economics Papers: this item is included in nep-dev and nep-tra
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Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:bwp:bwppap:10910

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