ABSTRACT
This chapter provides more insights into the dynamics and driving forces of the People's Republic of China's (PRC's) income inequality using Chinese Household Income Project (CHIP) data in 1995 and 2007. It reviews some of the recent government policies in the PRC that aims to address the issue of rising income inequality, including tax reform, labor market policy, pro-farmer policies, social protection, regional development strategy, and fiscal transfers. The chapter uses two common measures of income inequality: Gini coefficient and Theil index. It also looks at contributions of household characteristics to income inequality using a regression-based decomposition approach. The role of educational attainment has increased significantly in explaining household per capita income. During the PRC's planned economy period, while urban households did not pay income tax, there existed agricultural tax, special agricultural product tax, slaughter tax, and deed tax in rural areas.
