Top incomes and income polarisation in China

Abstract

Income polarisation is normally measured using household survey data, but such data often provide insufficient coverage of top incomes. This paper combines data from the Chinese Household Income Project and Top Incomes in China databases for 2002, 2013, and 2018 to study the trends in, reasons for, and heterogeneity of income polarisation in China between 2002 and 2018. Our main findings are as follows. (1) Introducing external top-income data increases the estimated level of polarisation in each of the three surveyed years, but polarisation trends are not affected. (2) Polarisation increases significantly between 2002 and 2013, due to a rise in polarisation among poor residents. Polarisation remains stable between 2013 and 2018, due to the expansion of the middle-income group; the convergence to the middle of the distribution is attributable mainly to the poor, rather than the rich. (3) In 2018, levels of polarisation are higher among male, well educated, and urban residents than among female, less educated, and rural residents, respectively.