ABSTRACT
Rising inequality has been a common feature of international economic development in the most recent decades, and China is no exception. One of the world’s most egalitarian societies in the 1970s, China in the 1980s and 1990s became one of the more unequal countries in its region and among developing countries generally. This retreat from equality has thus been unusually rapid. The Gini coefficient of inequality in household income rose by 7 percentage points (18 percent), or by 1.0 percentage point per year, between 1988 and 1995. 1 Inequality of rural house-hold per capita income rose an estimated 23 percent over the same seven years; urban inequality increased even faster—by 42 percent. 2 The reason the Gini ratio for overall inequality for China, including both urban and rural households, increased at a lower rate than that of either rural or urban distributions taken separately, is because overall inequality in China is dominated by the large urban-rural income gap that, according to our measurements, remained stable in real terms between 1988 and 1995. This finding contrasts with the official statistics showing the urban-rural gap rising by 20 percent between these years. The principal reason for this difference in findings is that many urban subsidies, which we count as part of urban income but the State Statistical Bureau (SSB) does not, melted away between 1988 and 1995. Thus the SSB overstates the growth of urban income during this period. 3
