Income Inequality and Economic Growth in China in the Last Three Decades

This article discusses the close relationship between high growth and rising inequality in China over a period of three decades since the 1980s. By tracing three key components of income inequality over time, i.e. rural, urban and the rural–urban issues, the study presents an overview of the changes that have occurred in processes of inequality in this country. This study also constructs a relationship between income inequality and growth using an econometric model in order to test the Kuznets Hypothesis that posits an inverted U relationship between income per capita and inequality. The article finds no evidence to support the Kuznets Hypothesis; it, instead, offers a multidimensional mode of analysis to explain why income inequality has increased in China over the past three decades.