Income inequality in China: causes and policy responses

Date

2016

Authors

Zhou, Yixiao
Song, Ligang

Journal Title

Journal ISSN

Volume Title

Publisher

Taylor & Francis

Abstract

The phenomenal economic growth in China has been accompanied by a rapid increase in income inequality. This paper reviews the historical trends and patterns of income inequality in China, discusses the potential causes underlying rising income inequality, and applies the functional distribution of income approach in understanding China’s income inequality. This analytical approach highlights how rising return to capital relative to wage incomes can be an important source for increasing income inequality in China. The paper provides the evidence which shows that the rapid economic growth in China has been relying on a model that pays high returns to various kinds of capital including financial capital and real estate, while the ownership of capital is very unequal. This finding prompts us to rethink about the causes of China’s income inequality and to formulate appropriate policies based on the new way of understanding this pressing issue of income distribution in China.

Description

Keywords

China, functional distribution of income, income inequality, institutional change

Citation

Source

China Economic Journal

Type

Journal article

Book Title

Entity type

Access Statement

Open Access

License Rights

DOI

10.1080/17538963.2016.1168203

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