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Understanding the Kuznets Process: An Empirical Investigation of Income Inequality in China 1978-2011

Author

Listed:
  • Wenli Cheng
  • Yongzheng Wu
  • CEMA
  • College of Mathematics and Computer Science, Hunan Normal University

Abstract

This paper investigates income inequality in the post-reform Chinese economy of 1978 to 2011. We identify a Kuznets inverted-U relationship between economic development and overall income inequality and provide evidence to suggest that this relationship was driven by the process of urbanization. We demonstrate that, after controlling for urbanization, low productivity in agriculture relative to that of the economy as a whole (dualism) was a significant contributing factor to income inequality. Inflation and the expansion of higher education are also found to have had an effect of widening inequality, but the effect of education does not appear to be robust.

Suggested Citation

  • Wenli Cheng & Yongzheng Wu & CEMA & College of Mathematics and Computer Science, Hunan Normal University, 2014. "Understanding the Kuznets Process: An Empirical Investigation of Income Inequality in China 1978-2011," Monash Economics Working Papers 12-14, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2014-12
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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2014/1214kuznetschengwucema.pdf
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    More about this item

    Keywords

    Kuznets curve; income inequality in China; Theil index; urbanisation; dualism;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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