Individual Income Gap During Transition Of China

Rapid economic growth, significant increase of inhabitant's income and substantial reduction of poverty are the symbols of the great achievements arising from the economic development and institutional reform in China. However, the tendency of income gap gets larger and larger during transition period. More and more benefits induced by development and reform are shared by only a few rich people. The large income gap is not only in harmony with the ends of development, but also harmful to the sustained development of economy. Therefore, it has great significance in researching the status quo and the tendency of income gap and finding what causes it and the alternative policies that can adjust it. That is the original motive and the objective of this thesis.The economic literatures document the static and dynamic factors that decide the individual's income gap theoretically and empirically. However, literatures focus mostly on the relations between economic development and scale income gap, and the theoretical and empirical research of income gap under the joint action of development and institutional reform is inadequate. The main aim of this thesis is to explain the income gap during transition period of China.Empirical analysis shows that the income gap is becoming larger and larger and to a high level during transition period. The result is based on the empirical analysis of the income gap of all inhabitants, intra-rural, intra-urban and urban-rural. The enlarged income gap can be mainly attributed to the disparity between urban and rural and the disparity between districts.Dual transition of economic development and institutional reform is the significant characteristic of China during this special period. The causes of income gap can be basically explained by economic development, institutional reform and corresponding policies. Marketization is the original incentive of economic growth. During the process of the erection and perfection of the market mechanism, economic development under the efficiency target is one main factor of the enlarged gap. Imperfect mechanisms, intrinsic motivations of market and special policies accrued from the transition of traditional system to socialism market system are the rest main factors. Institutional reform and economic development push the realization of the efficiency objective in initial distribution, yet the expanding tendency of income gap has not been controlled effectively. The reason for that is the lag of the establishment of the redistribution system and social security system that are able to regulate effectively the income distribution in order to pursue societal equity during the process of China' s marketization reform.The income gaps are partly active and necessary changes arising from transition period and are partly disorder and unfavorable changes arising from the imperfect market system and inappropriate polices. The augmented gap will impede the development and the reform unless the adverse effects are adjusted by appropriate polices. Based on the former analysis the author proposes some alternative polices that may be used to shorten the gap. The policies include establishing the redistribution system in accord with market economy, increasing material and human capital investment on agriculture and farmer and the low income class through public financial transfer payment, taxing high income class and enhancing the responsibilities of the rich, bettering the social security system and welfare system and creating opportunities and instruments indispensable to the development of the poor, bettering law system and deepening political reform to restrain and handle illegal and unusual incomes without mittens .The thesis is composed of five parts.Part I Introduction: topic, method and structure;Part II Retrospect of theoretical and empirical literatures on income gap; PartIII Empirical analysis of individual income gap during transition period of China; PartIV Explanations on the tendency of income gap; Part V Some alternative roads to bridge the gap...