The Income Gap Between Urban and Rural Residents in China: Since 1978

Abstract

Previous studies on the income gap between rural and urban areas have concentrated mainly on the flow factor in the income measure. This study investigates income inequality between rural and urban residents during 1978–2014 in China based on both urban–rural flow and the accumulated income Gini coefficient. In addition, the study compares the general changes in trends in these Gini coefficients in terms of urbanization and the ratio of urban-to-rural average income by decomposing the Gini ratios. The results show that the Gini coefficient of flow income has an inverted U-shaped pattern, while the Gini coefficient of accumulated income decreases significantly in most years, showing a decreasing trend since China’s economic reform and opening, with a time lag and fluctuation. Thus, either the accumulated or flow income Gini coefficients decline continuously as urbanization progresses, which could help governments craft fair policies to promote urbanization, narrowing the income gap between rural and urban areas.