Income inequality and income mobility in China and in the United States

This dissertation investigates the patterns of income inequality and income mobility in China and in the United States. The first chapter presents a review of the literature, followed by a discussion of the data and sample selection issues in Chapter 2. Chapter 3 compares income mobility of urban individuals in China and in the United States, and finds that the rise in inequality in China in the first half of the 1990s is accompanied with a degree of income mobility that is higher than that of the United States. Relative importance of permanent income in China in the 1990s is lower than that in the United States, and the share of variance in incomes attributable to the permanent component increased mildly in the 1990s for urban China. The inclusion of imputed income from subsidies does not substantively alter the results on inequality and the degree of income mobility in urban China.; Chapter 4 extends the analysis to urban households. There is a large amount of persistence in labor supply in both countries, but once differences in the number of workers per household is adjusted for, the gap between China and the United States in income mobility narrows. Inclusion of subsidies reduces income inequality and income mobility in China by approximately ten percent. Measurement errors exert a more notable effect on measures of income mobility for households in America than in China, though measured income mobility is still higher in China.; Chapter 5 discusses the urban-rural gap, and posits social welfare functions that allow for a trade-off between increases in income and increases in income inequality. When examining the annual incomes of rural households and of urban households separately, there is greater annual income inequality and less income mobility in the U.S. than in China. However, when incomes are averaged over three years, when adjustments are made for the size and composition of households, or when rural and urban households are pooled together, income inequality among all households differs little between China and the USA in the 1990s. Social welfare functions suggest strong increases in well-being, despite the rise in inequality, especially for urban households in China.