The evolution of income and wealth inequality in China

Organised by

• Department of Economics

China's GDP per capita grew from 358 USD in 1990 to 12,720 USD in 2022. Over the same period inequality in both income and wealth increased substantially. This paper proposes a general equilibrium multi-sector growth model with rich heterogeneity to quantify the impact on inequality of key changes that took place starting in the early 1990s. We find that rural-urban migration has alleviated the increase in income inequality by narrowing the rural-urban income gap, and that the emergence and growth of the private sector is both a fundamental engine of growth and the key driving force behind the increase in wealth inequality. Our quantitative exercise suggests that income and wealth concentration will continue to increase until the 2050s.

Co-author: Yan Wang, Beijing Normal University