Chinese Residents’ Income Bipolarization

Since the reform and opening up, China’s economic has developed a lot. Both economic output and resident income are growing significantly. However, the imbalance of income distribution is also getting serious and has led to many contradictions and conflicts, some of which, such as mass conflict and the middle class empty, can not be explained by poverty and inequality. In order to explain these phenomena, Western scholars begin to introduce the concept of income polarization.The micro-data in this article is acquired from China Health and Nutrition Survey data from1988to2010. This article firstly characterizes the Lorenz curve of the dynamic evolution of urban and rural residents’ income distribution through kernel density estimation, the cumulative distribution function, and other methods. Then, this article analyzes the polarization state of the income of urban and rural residents by selecting the appropriate Polarization measurement formula according to the principles of separating medians into groups. Empirical analysis shows that the income polarization nationwide is the same as the income polarization of rural residents. Both fall firstly and then slowly continue to rise, and then fall again in the end. The polarization of urban residents is different with large volatility, but the trend now is roughly the same as the trend of country and rural residents income.By the decomposition of different sources of income we can understand the impact of the various sources of income on the polarization changes. This article focuses on the source of income in the form of DER polarization index decomposition, and then select CHNS data decomposition empirical analysis. The results show that:when decomposing the country residents, rural residents and urban residents income sources, structural effect of polarization promotes the process of the increase of polarization, while the concentration effect weakens the polarization. As to the wages income, the concentration effect promotes polarization. while as to transfer income, structural effect and concentration effect on the polarization weakens polarization. As to the operating income, the structure effect promotes polarization and the concentration effect weakens polarization.Therefore, lot of measures have to be firmly conducted such as expanding the size of the middle-income groups, increasing the income levels of poverty group,planning rationally the developments of urban and rural ares as a whole, increasing residents’ wage income and allocating appropriately the government transfer payments, so as to reduce the degree of polarization of income.