Decomposition Analysis On Income Inequality In Urban And Rural China

In the past thirty-three years since reform and opening up, the income level of China's residents has increased significantly, but at the same time the income distribution is keeping worsening. The too large income gap not only threatens the economy's continuous development, but also is the main reason for inducing social conflicts. Therefore, it has been national-wide acknowledged to reduce income inequality in China. As the income inequality in urban and rural areas accounts for the majority of the whole country's income inequality, it should be an efficient way to cut the total income inequality by narrowing the income inequality in urban and rural areas.For that reason, many scholars have done great numbers of decomposition analysis on urban and rural income inequality from many perspectives. Although these studies are helpful for us to understand the factors affecting income inequality, they also have some drawbacks which mainly include:1) the mathematical methods are chosen arbitrarily;2) the urban studies lack timeliness;3) there still exist problems and arguments on some important conclusions related to the factors affecting rural income inequality. As the dissertation is still focused on decomposing urban and rural income inequality, aiming at the above drawbacks, some improvements have been made. Firstly, the concept, the measurement and the decomposition methods of income inequality are thoroughly reviewed before the specific question is studied, which makes great methodology foundation for the positive analysis. Secondly, three questions are studied by using more representative and updated datasets:1) the effects of the real estate and the finance markets on enlarging urban income inequality in2002-2007;2) the relationship between the changes of urban residents'employment, age and education structure and urban income inequality in2002-2007;3) the further analysis on the effects of different factors influencing rural income inequality.By studying the above three questions, some conclusions are drawn:1) The urban income inequality show the trend of rising first and then falling in2002-2007, but the extent of income inequality in2007is still higher than that in2002.2) The impacts of the income from the real estate and the finance investments on enlarging urban income inequality are becoming stronger because of the two markets'fast development. And the real estate investment can widen the urban income inequality more greatly than the finance investment for its higher investment threshold and more stable return rate.3) The downsizing employment of the state and collective enterprises, and the enlarging gap between the return rates of higher education and other forms of education are the two main reasons for the rise of urban income inequality. And one important reason for the widening gap of the education return rates is that the fast development of the real estate and the finance markets provides more opportunities and ways to make money for people who have received higher education. Besides, the aging of urban population contributes to narrow the urban income inequality.4) Although the region is still the most important factor affecting rural income inequality, its impacts are becoming weaker, while the effects of education, wage employment, political capital and entrepreneurship are becoming stronger. And in sum, human capital plays more important role in enlarging rural income inequality than physical capital.Based on the above conclusions, five policy suggestions are proposed:reforming the personal income tax, especially improving the mechanism to collect tax from the property income; controlling the quick rise of real estate prices and strengthening the supervision of the finance market; breaking some industries'bureaucratic monopoly and regulating the income distribution inside the monopoly enterprises; increasing the public transfer for part of the aging population in urban area; raising the amount of public investment on the education and the skill training of rural households in poor regions.The main contributions of the dissertation to the literature include the following three aspects.1) Several major decomposition methods are thoroughly reviewed.2) It is a good supplement to the few decomposition studies on2002-2007urban income inequality, and it takes the lead in studying the effects of the real estate and the finance markets, also the population aging on urban income inequality.3) It improves some decomposition analysis on rural income inequality, and it helps to clarify the policy tendency for narrowing the income inequality in rural area.