This paper examines what impacts, if any, macroeconomic performances and macroeconomic policy have had on income inequality in China during the period 1955--1998. A vector autoregression model (VAR) is estimated which includes measures of macroeconomic performance, such as inflation and unemployment, and of macroeconomic policy such as money supply and fiscal expenditure. The VAR techniques, "innovation accounting” and "Granger causality,” are utilised to examine the causal linkage, if any, between "macro-factors” and income disparity in China. We find that fiscal spending and unemployment appear to be the most important sources of change in income dispersion as far as the "macro” factors are concerned. [C32, D31, O11 and O53]
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