proportion in the highest-income group and the decrease of the population proportion in the lowest-income group. However, after 1996 the income shares of the four lower-income groups have been declining while the income share of the highest-income group has been increasing, as a result the income ratio has been going up steadily and reaching over 22: times by 2005 (Chen, 2013). The main characteristics of income inequality in China can be analyzed through the rural-urban dichotomy and inter-regional differences (Li, 2016), as seen in Table 2 and Figure 5.
Historical panorama of Income Inequality between Urban and Rural areas in China Stage Description Urban Rural First Stage (1978-1984) Gap between urban and rural income declined Urban reform had not yet started (income of urban residents still determined by the state through planned economy). Rural economic reform (universal implementation of the household contract responsibility system) and reform on the pricing of agricultural products and the advancement of agricultural production technologies. Second Stage (1985-1994) Inequality between urban and rural incomes witnessed a continuous increase (income level of urban residents increased at a faster rate than rural residents) Economic reforms on the micro level started (enterprises were allowed to raise employee wages, bonuses and benefits). Township enterprises rapid development provided new sources of income. Third Stage (1994-1997) Gap between the incomes of China’s urban and rural residents narrowed again (non-agricultural incomes of the rural households increased at a relatively faster rate) Large-scale public enterprises restructuring (adjusted the interest relationship between the enterprises and their employees) and resulted in a great number of layoffs and emergence of a new urban poor population. Rural township enterprises went through a similar reform and promoted the development of the rural non-agricultural economy. Fourth Stage (1998-present) Urban-rural income gap in expansion The further development of the market economy aggravated deep-rooted factors of urban-rural differentiation (education disparity, migrant labor exploitation, etc..). Even though rural households’ non-agricultural income has been increasing with the expansion of rural migrants labor, their income growth rate increase do not follow the faster pace of increase of the urban resident’s income. Possible Next Stage Re-migration of the migrant workers to the countryside Increased remittances to rural areas coincide with narrowed income inequality since 2008 due to reduction in gap between urban and rural households. Mainly due to rural migrant workers’ wages increasingly more quickly than those of skilled urban workers, and to the social policies implemented in rural areas (Li, 2006: 4).
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