Institute for Research on Labor and Employment

We employ a new method to estimate China's income distributions using publicly available interval summary statistics. We examine rural, urban and overall income distributions from 1985-2001. We show how the distributions change directly as well as examine trends in equality. Using an inter-temporal decomposition of aggregate inequality, we determine that increases in inequality within rural and urban sectors and the growing rural-urban income gap have been equally responsible for the growth in overall inequality over the last two decades. However, the rural-urban gap has played an increasingly important role in recent years. We also show that urban consumption inequality rose considerably.