Since the start of economic reforms in 1978, China has experienced the largest increase in income inequality of all countries for which comparable data are available. According to the World Bank (1997), China’s Gini coefficient increased from 28.2 in 1981 to 38.8 in 1995 based on official survey data. Another study that used internationally standard definitions for incomes estimated China’s Gini ratio at 38.2 in 1988 and 45.2 in 1995, a level that already surpassed many developing economies in Asia (Azizur Khan and Carl Riskin, 1998). Are these income inequality changes the consequence of institutional reforms that replaced egalitarian rewards with work incentives, employment contracts, and labor mobility? This paper uses household survey data collected by China’s State Statistical Bureau (SSB) to investigate the sources and causes of this rising inequality. By analyzing Gini ratios and generalized entropy measures, I decompose the overall inequality into three sectoral components: ( i ) inequality within rural areas, ( ii ) inequality within urban areas, and (iii ) sectoral disparity. The data indicate that increases in rural – urban income differentials have been the driving factor behind the rising overall inequality in China. I argue that urbanbiased policies and institutions, including labor mobility restrictions, welfare systems, and financial policies of inflation subsidies and investment credits to the urban sector, are responsible for the long-term rural–urban divide and the recent increases in disparity.

For 20 years following 1949, average total fertility per woman in China hovered just above six children. The year 1970 marked the beginning of persistent fertility declines. By 1980, the rate had dropped to 2.75, and since 1992 it has remained under 2. While some of this transition can be accounted for by broad socioeconomic developments, the extent to which it is attributable to China's unique population policies remains controversial. This paper analyzes household data from the 1992 Household Economy and Fertility Survey (HEFS) to provide the first direct microeconomic empirical evidence on the efficacy of these policies.

The Great Leap Forward disaster, characterized by a collapse in grain production and a widespread famine in China between 1959 and 1961, is found attributable to a systemic failure in central planning. Wishfully expecting a great leap in agricultural productivity from collectivization, the Chinese government accelerated its aggressive industrialization timetable. Grain output fell sharply as the government diverted agricultural resources to industry and imposed an excessive grain procurement burden on peasants, leaving them with insufficient calories to sustain labor productivity. Our analysis shows that 61 percent of the decline in output is attributable to the policies of resource diversion and excessive procurement.