Income Inequality a Growing Problem in Urban China

A study recently featured in the Journal of Comparative Economics examines income inequality in urban China. Capital income increased during the late 1980s and continued to rise until 2009. The researchers found that the share of capital income between classes was grossly unequal. For urban residents, capital income accounted for less than 2% of their total income. In contrast, for the top 1% in China, capital income accounted for more than 30% of their total income. Additionally, the share of capital income for the top 1% is increasing rapidly. In 1988, capital income only made up 10% of the top earners income, but in 2007 this figure increased to 37%. The researchers also examined the influence of capital income on income inequality by analyzing the Gini coefficient for the eastern, central, and western regions of China. Although there appeared to be no statistically significant difference between the central and western regions, the Gini coefficient was higher in the eastern region, indicating that the eastern region has more extensive income inequality.