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Income and Consumption Inequality in Urban China: 1992-2003

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  • Hongbin Cai
  • Yuyu Chen
  • Li-An Zhou

Abstract

Using the nationally representative Urban Household Income and Expenditure Survey (UHIES) conducted by the National Bureau of Statistics (NBS) of China, we document a steadily rising trend in income and consumption inequality during the period from 1992 to 2003 in urban China. Despite the rising urban inequality over time, the social welfare of urban residents unambiguously improved because every income group saw their income and consumption increase over this period (higher income groups experienced faster increases). Moreover, consumption inequality follows income inequality very closely. Labor income inequality accounts for about two-thirds of total income inequality quite consistently over time. We find that only about one-third of urban inequality can be attributed to observable individual choices and characteristics, of which education has increasing explanatory power, while regional differences become less important over time. We also find that restructuring of the SOE sector, urbanization, and globalization are important contributing factors to rising overall urban inequality and the within-group inequality not accounted for by observable individual choices and characteristics. (c) 2010 by The University of Chicago. All rights reserved.

Suggested Citation

  • Hongbin Cai & Yuyu Chen & Li-An Zhou, 2010. "Income and Consumption Inequality in Urban China: 1992-2003," Economic Development and Cultural Change, University of Chicago Press, vol. 58(3), pages 385-413, April.
    • Handle: RePEc:ucp:ecdecc:v:58:y:2010:i:3:p:385-413
    DOI: 10.1086/650423
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    References listed on IDEAS

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    6. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 163-193.
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