Factor Decomposition of Rural Regional Income Inequality Changes in China

  • Institute of Geographic Sciences and Natural Resources Research,CAS,Beijing 100101,China

Received date: 2007-09-27

  Revised date: 2008-05-14

  Online published: 2008-08-25

Supported by

R&D Infrastructure and Facility Development Project of the Ministry of Science and Technology (Data-sharing Network of Earth System Science), No.2005DKA32300; Knowledge Innovation Project of CAS, No.KZCW2-YW-322


This paper focuses on the changes of rural regional income inequality and attem pts to decompose them into different com ponent factors based on Giniindex. A new method is proposed to decompose the influence of each factor on inequality changes into its structure effects and its real inequality effects. In order to explore the factors behind the changes in rural incom e inequality in China, the overall rural income inequality is decom posed into contributions by different incom e sources: w ages, household operations, properties, and transfers. This analysis is only for the period of 1993-2005 due to a serious data difference before 1993. A pplication of the m ethod to C hina's rural regional inequality in the period 1993-2005 reveals that household operations still represents the dom inant source of rural incom e although its influence on rural inequality is decreasing. In recent years, w ith the decline of household operation concentration index and its percentage share, it had positive effects in reducing the total regional inequality. A lthough w age incom e only accounts for som e 26% -40% of the total disposable incom e, its contribution to the overall incom e inequality ranges from 43% to 50% . This im plies that the w age incom e played the m ost im portant role in China's rural regional incom e inequality. How ever, for the changes of rural inequality, the contribution percentage of the wage component did not display any upward trend although its absolute share in the total income increased straightly. There is no strong evidence to show that wage incom e enlarge rural regional incom e inequality. O n contrast, regional concentration in w age incom e did help reduce total regional incom e inequality since the m id-1990s. The contribution of w ages incom e in raising regional inequality m ainly com es from incom e share increase. These increases are a direct consequence of developm ent process of urbanization and industrialization. In the future, as long as the concentration decline effects continue to exceed the share increase effect, w age m ust contain positive effects in reducing overall incom e inequality. Thus, to prom ote industrialization and urbanization in less developed areas and encourage farm ers to gain m ore w ages from local enterprises and outgoing em ploym ent w ould be one of the im portant approaches in reducing rural regional inequality. In recent five years, the role played by properties and transfers in rural incom e inequality increased fast and steadily. H ow ever, these tw o com ponents have different influence m anner. The increasing contribution from properties is m ainly due to the increase of its share. A s to the transfer incom e influence, the increase of its share enlarged rural incom e inequality, but the evident decline of its concentration reduced regional inequality. Therefore, m ore financial transfer and social services from the central governm ent to less developed areas w ould be m ore and m ore effective in tackling rural regional inequality in C hina.

Cite this article

LIU Hui . Factor Decomposition of Rural Regional Income Inequality Changes in China[J]. Acta Geographica Sinica, 2008 , 63(8) : 799 -806 . DOI: 10.11821/xb200808002


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