Revisiting income inequality in rural China: a decomposition by regression approach

Abstract

This study aims to investigate the sources of income inequality in rural China. The regression-based decomposition approach is employed to measure the relative contribution of each determinant to net income of rural residents in China. The analysis is based on a unique database of financial development compiled at the county level. This study contributes to the literature on income inequality in China by filling a gap in existing literature which is based mainly on provincial and survey data. The results clearly reveal that financial development, industrialization, the development of the tertiary sector and employment are important income determinants and contributors of intercounty inequality in rural China. The findings may provide valuable information for combating inequality in the years ahead.