Regional Income Inequality in China

Abstract

This chapter is concerned with analyzing developments in income inequality in China during the period of its economic reform. An overview of regional income disparity is conducted, focusing upon that between the coastal, central and western provinces, and the key factors behind this. A conceptual framework for measuring income disparity both between and within provinces is presented, and utilizing appropriate data the Theil index is calculated. It is found that income disparities within provinces have declined. However, income disparities between regions and provinces have increased significantly during the period of the 1990s. The government’s policy response to such a widening disparity and its prospects of being successful is discussed.