The trend of the Gini coefficient of China (1978–2010)

ABSTRACT

This study proposes a new approach to analyse the effects of an overlap term on the calculation of the overall Gini coefficient and estimates China’s Gini ratios since the adoption of the economic reform and open-door policies. A decomposition of the Chinese Gini coefficient for 1978–2010 reveals that the key factor contributing to income inequalities is the income disparity between rural and urban inhabitants. We further investigate the features of this income inequality between rural and urban areas and employ statistical approaches to evaluate the effects of urbanisation and rural-to-urban average income on nationwide income inequality. The results show that accelerating the pace of urbanisation is mainly responsible for decreasing China’s income disparity. Drawing on these results, we conclude with suggestions for related policies.

KEYWORDS:

• Chinese Gini coefficient
• decomposition of Gini coefficient
• urbanisation
• income disparity
• rural–urban income

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

We appreciate the support of the National Natural Science Foundation of China (Nos. 71473203), the Program for the Key Program of National Social Science Fund of China (No. 15AJY005) and Sichuan Province Social Science High Level Research Team.

Notes on contributors

Jiandong Chen

Jiandong Chen is a professor in economics in School of Public Adminstration, Southwestern University of Finance and Economics, his research interests include income distribution, energy and environment.

Ming Pu

Ming Pu is a professor in economics in Insurance School of Southwestern University of Finance and Economics, his research interests include income distribution and insurance policies.

Wenxuan Hou

Wenxuan Hou is a professor in finance in University of Edinburgh Business School, his research interests include income distribution, accounting and finance.