Income inequality in the People's Republic of China and its decomposition : 1990-2004

This paper estimates income inequality in the People's Republic of China at the national, regional, and provincial levels using extrapolated unit-level household income data covering urban and rural populations of 23 provinces during 1990-2004. The estimates indicate that income inequality increased significantly during the last two decades, but the extent of the increases was lower than reported in most sources by about 20 percent when regional differences in cost of living are adjusted. The major sources of the increases in inequality were found to be within urban inequality and between urban and rural inequality, with their contribution increasing, respectivejy, from 15.7 and 12.0 percent in 1990, to 34.0 and 30.4 percent in 2004. The between-region and between-province inequality only accounted for 3.8 and 11.2 percent, respectively, in 2004. © 2008 Asian Development Bank.