The Generalized Entropy Index Model and the Decomposition of Regional Income Inequality in Rural China during Transition

摘要

The introduction of market-oriented reform and openness to the world has been bringing China a great economic success since late 1970s. Meantime, farmer's income has experienced quickly increasing and then stagnant stages, while rural income inequality is becoming increasingly large. In this paper, we follow Theil (1967) and Shorrocks' (1980,1984) pioneering work, using the Generalized Entropy Index (GEI) to measure and decompose the rural regional income inequality over the whole reform period. With exploring the macroeconomic background of farmer's income growth and fluctuation, we employ time series data to investigate the determinants of farmer's income. We also use a large sample data from a nationwide agricultural household survey to analyze the income inequality in the contemporary rural china, which will provide an alternative way to explain the sources of income growth. By computing and decomposing overall rural income inequality into contributions by different sources of income, we will explore the factors which determine the changes in rural income inequality. The contribution of each source of income is further decomposed into its between regions and within-region contributions. Finally we will discuss the policy implication of the results.