Research On Inequality Based On Utility

The problem of inequality is related to China's economic development.Although the living standard of most people has improved significantly,the income distribution pattern is still insufficient,which leads to social inequality.So we must accurately measure the degree of income inequality in order to ensure the sound and orderly development of China's economy.There are two ways of measurement:income method and utility method.This paper compared two methods from the angle of theory and demonstration respectively.In the theory part,the paper proved that consumers' preference was always non-homothetic,then it compared non-homothetic preference utility with homothetic preference utility and finding the inequality was same when preference was homothetic.After that,the paper established a non-homothetic preference function,then assigned unknown parameters and used MATLAB to emulate the income inequality curve,and compared the curve with Lorenz curve lastly.The paper found when the society was justice,then the degree of income inequality measured by utility function was slightly larger than the consequence measured by Gini coefficient.With the society became more and more injustice,the degree of income inequality measured by utility function was smaller than the consequence measured by Gini coefficient.There was no doubt that the degree of income inequality measured by utility function was equal to the consequence measured by Gini coefficient at some point.In the empirical part,this paper chosen a utility identity according to the proportion utility theory,and established a period varying coefficient model using data from 2013 to 2016 to find the income gap between urban and rural areas measured by utility method was always bigger than the gap measured by income method in the existing domestic social inequity,indicating that the current social inequity has been higher than the theoretical value.Besides,the paper also found that the degree of income inequality between urban and rural areas in western regions was biggest.Accordingly,this paper put forward three economical inspiration:using rational treatments of social inequality and appropriate fiscal subsidy policy,persisting in the personal income tax mechanism starting to use property income tax mechanism.Finally,we need to revitalize the western region and pay attention to the development of western cities.