Rising income inequality in many countries is “bringing income distribution in from the cold” as a research topic (Atkinson, 1997, p. 297). In the United King dom, for instance, the Gini coefficient of inequality in household income per equiva lent adult rose by 9 percentage points, from 25 to 34 percent, between 1979 and 1991, or by 0.75 percentage points per annum (Goodman and Webb, 1994, p. A3). China has similarly undergone an increase in income inequality. The Gini coeffi cient of household income per capita rose by 7 percentage points, from 38 to 45 percent, between 1988 and 1995, or by 1.0 percentage points per annum. This rising inequality in China, as in many other countries, deserves explanation.