Luo, XubeiZhu, Nong2012-05-312012-05-312008-08https://hdl.handle.net/10986/6789Income inequality in China has risen rapidly in the past decades across regions, between rural and urban sectors, and within provinces. The dynamics of divergence across these sub-national areas have taken the form of a "race to the top" - meaning that all segments of the population, including the poor with low education in lagging inland rural areas, have experienced gains in average income. The largest gains have been registered by those with higher income and education in leading coastal urban areas. Using the China Economic, Population, Nutrition and Health Survey data of 1989 and 2004, we show that the most important factors explaining overall inequality are differential returns to schooling and sector of employment. A decomposition analysis based on household income determination shows that the increase in returns to education explains two-thirds of income changes in urban areas and one-sixth in rural areas. The widening income gaps are the consequence of higher growth in leading urban and coastal areas and that the skilled population has benefited more from the economic reforms carried out during the last 25 years. The authors argue that rising income inequality can be part of a normal process of development at a certain stage, and that the dynamics of spatial income divergence in the form of "a race to the top" can be desirable to some extent as it unleashes competitive pressure and creates incentives for investment in skills. Continuing to improve market efficiency and investing in people, in particular improving education service in lagging areas to poor people, are important for sustainable growth and equitable distribution in the long run.CC BY 3.0 IGOABSOLUTE POVERTYABSOLUTE VALUEACCESS TO EDUCATIONACCOUNTINGAGGREGATE INCOMEALLOCATION OF RESOURCESANNUAL INCOMEAVERAGE ANNUALAVERAGE GROWTHAVERAGE GROWTH RATEAVERAGE INCOMEBALANCED GROWTHBASIC EDUCATIONCOMPARATIVE ADVANTAGECONSUMERCONSUMER PRICE INDEXCONTRIBUTIONCONTRIBUTIONSCOUNTRY REGRESSIONSDECOMPOSITION ANALYSISDEMOGRAPHIC PRESSUREDENSITY CURVEDEPENDANTDEVELOPING WORLDDEVELOPMENT ECONOMICSDEVELOPMENT EFFORTSDEVELOPMENT REPORTDISPARITY IN INCOMEDISTRIBUTIONAL CHANGESDISTRIBUTIONAL EFFECTDISTRIBUTIONAL EFFECTSDIVERSIFICATIONECONOMIC DEVELOPMENTECONOMIC EFFICIENCYECONOMIC GROWTHECONOMIC LITERATUREECONOMIC MANAGEMENTECONOMIC PROGRESSECONOMIC REFORMECONOMIC REFORMSECONOMIC REVIEWECONOMIC STUDIESECONOMIC TRANSITIONECONOMICS LETTERSEDUCATED PEOPLEEDUCATION LEVELEMPIRICAL EVIDENCEEMPIRICAL FINDINGSEQUALITY OF OPPORTUNITYEQUITABLE DISTRIBUTIONFARM ACTIVITIESFARM ACTIVITYFARMERSFINANCIAL CONSTRAINTSFISCAL CONSTRAINTSFIXED EFFECTSFOOD POLICYFOOD SAFETYFORMAL EDUCATIONFULL EMPLOYMENTGINI COEFFICIENTGINI INDEXGOVERNMENT POLICIESGRAIN PRODUCTIONGROWTH EFFECTGROWTH ELASTICITYGROWTH PERFORMANCEHEALTH CAREHOUSEHOLD DATAHOUSEHOLD INCOMEHOUSEHOLD INCOMESHOUSEHOLD LEVELHOUSEHOLD MEMBERSHOUSEHOLD PER CAPITA INCOMEHOUSEHOLD SURVEYHUMAN CAPITALHUMAN CAPITAL INVESTMENTIMPACT OF EDUCATIONINCOMEINCOME CHANGEINCOME DIFFERENTIALSINCOME DISPARITYINCOME DISTRIBUTIONINCOME DISTRIBUTIONSINCOME EQUATIONINCOME GAINSINCOME GAPINCOME GROWTHINCOME GROWTH RATEINCOME INCREASEINCOME INEQUALITYINCOME LEVELINCOME LEVELSINCOME POVERTYINCOME SUPPORTINCOMESINCREASE IN INCOMEINDEPENDENT VARIABLESINEQUALITY FALLSINEQUALITY MEASURESINEQUALITY TRENDSINTERNAL MIGRATIONINTERNATIONAL FOOD POLICY RESEARCH INSTITUTEINTERNATIONAL PRICEINTERNATIONAL PRICESINVESTINGLABOR FORCELABOR MARKETLABOR MARKETSLAND REFORMLEVEL OF EDUCATIONLIVING STANDARDSLOCAL GOVERNMENTSLOG-NORMAL DISTRIBUTIONLOGARITHMIC SCALELONG RUNLOWER INCOMEMARGINAL RETURNSMARKET ECONOMYMEAN GROWTHMEAN INCOMEMEAN INCOME GROWTHMEAN VALUEMEDIAN INCOMEMIDWIFEMIGRATIONMODERNIZATIONNATIONAL LEVELNON-INCOME DIMENSIONSNURSENUTRITIONOPEN ECONOMIESOWNERSHIPSPER CAPITA GROWTHPER CAPITA GROWTH RATEPOLICY IMPLICATIONSPOLICY RESEARCHPOLICY RESEARCH WORKING PAPERPOLITICAL ECONOMYPOORPOOR GROWTHPOOR HOUSEHOLDSPOOR PEOPLEPOPULATION CENTERPOVERTY ASSESSMENTPOVERTY DATAPOVERTY HEADCOUNTPOVERTY INCIDENCEPOVERTY INDEXPOVERTY LINEPOVERTY LINESPOVERTY MEASURESPOVERTY REDUCTIONPOVERTY-GROWTH-INEQUALITY TRIANGLEPOWER PARITYPRO-POORPRO-POOR GROWTHPRODUCTIVITYPROGRESSPROPERTY RIGHTSPROPORTIONAL CHANGEPROSPERITYPUBLIC ENTERPRISESPUBLIC INVESTMENTSREAL INCOMEREDUCING POVERTYREGIONAL DISPARITIESREGIONAL INEQUALITIESREGIONAL INEQUALITYREGIONAL POLICYREGRESSION RESULTSRELATIVE IMPORTANCERELATIVE INCOMERELATIVE INCOMESREMITTANCERESOURCE CONSTRAINTSRESPONSIBILITIESRETIREDRETIREMENTRETIREMENT AGERETIREMENT PENSIONRISING INCOME INEQUALITYRISING INEQUALITYRURALRURAL AREARURAL AREASRURAL HOUSEHOLDRURAL HOUSEHOLD INCOMERURAL HOUSEHOLDSRURAL INCOMERURAL INEQUALITYRURAL LABORRURAL POVERTYRURAL POVERTY RATESEGMENTS OF SOCIETYSENIORSIGNIFICANT IMPACTSKILL LEVELSKILLED LABORSKILLED WORKERSTOCKSSUSTAINABLE GROWTHTYPE OF WORKUNEMPLOYEDUNEMPLOYMENTUNEQUAL DISTRIBUTIONURBAN AREASURBAN CENTERSURBAN POPULATIONURBAN POVERTYURBAN UNEMPLOYMENTURBAN WORKERSURBANIZATIONWAGEWAGE DIFFERENTIALSWAGE GROWTHWAGE LEVELWAGESWHITE-COLLAR WORKERSRising Income Inequality in China : A Race to the TopWorld Bank10.1596/1813-9450-4700