Non-agricultural Income And Income Inequality In Rural Area

The income inequality problem is one of the focuses in the academic circle and our society. Current research on this topic centered more on income inequality of rural-urban, within regions or industries, while less on income inequality within rural areas. The negligence of income inequality in rural area results from the fact that rural-urban income inequality is terrible. In fact, with the accelerating urbanization and rural-urban migration process, income inequality among rural residents has grown even larger. The critical factor is the increasing non-agricultural income.The non-agricultural income includes wages income and non-agricultural income from household business, which are earned by working in urban area, township enterprises, or operating small business. Because of the long-standing scissors gap and the resulting profitability difference between agriculture and non-agricultural industry, moving rural labors from the land to non-agricultural production gradually contributed to the enlarging income inequality within rural areas. Therefore, it is necessary to survey present situation of income inequality in rural area and analyze the role that non-agricultural income plays in the income inequality process in rural area.This paper analyzes several central topics regarding to non-agricultural income and income inequality in rural area, using a quantitative method with data from China Health and Nutrition Survey covering seven provinces, ranging from 1989 to 2006. It includes two parts:the first part measures income inequality in rural area by Gini coefficient and Theil index, estimates the portion contributed by non-agricultural income to income inequality, and gauge the non-agricultural income inequality by Gini coefficient; the second part examines the factors that influence the non-agricultural income inequality by the framework for inequality decomposition, and calculates the quotient contributed by these factors to the non-agricultural income inequality.It is found that the income Gini coefficient of rural area has always been over 0.4, and has exceeded 0.5. In the three income categories, non-agricultural income makes the greatest contribution (more than 45%) to the rural area income inequality. The Gini coefficient of non-agricultural income is between 0.668 and 0.783. The top three factors which affect non-agricultural income inequality are education, political capital and region, contributing almost 80%.