A Comparative Analysis of Income inequality Between India and

China
Chau Tran and Shamila Sarwar
Wesleyan College

Introduction

Initial Conclusion and

Future Research

Income inequality is a fundamental factor that

contributes to the disparity of opulence within a
nation. The United Nations -Economic and Social
Commission for Asia Pacific report confirms an
increased income inequality in major economies
including China and India. Whether or not income
inequality is detrimental to the economic growth rate
of a nation is debatable. This paper explores the
debatable topic to settle on the argument that despite
persistent income inequality, both the economies of
China and India, in the past few decades, have
experienced commendable progress of opulence.

The two graphs compare and contrast the overall

Gini index between China and India over the
period of 1980-2010

Fig.1: China Gini Index

1980 - 2005

Fig.2: India Gini Index 1980-2010

Background
In 1978, China began the fiscal redistribution reform
which, in turn, led to a surge in corruption issues
that persist until recent years. The reform, initially
intended to fix inefficiencies in the allocation of
financial resources, which consequently worsened
the problem of income inequality
India has implemented programs such as pensions
schemes, and systems in order to strengthen the
administrative capacity. To ensure a wider coverage
of pensions at a reasonable fiscal costs, India has
expanded non-contributory means-testing social
pensions. Given that means-testing can help keep
the fiscal costs low, this policy has helped India to
boost equality of opportunity and reduce income
inequality.

Source for Fig.1&2 : Gini Index By Country." Quandl. Web.

<https://www.quandl.com/c/demography/gini-index-by-country>.

URBAN-RURAL GINI INDEX OF CHINA

FROM 1978-2013

TREND IN INCOME INEQUALITY IN

OTHER DEVELOPING ASIAN COUNTRIES

Methods
The paper looks at the overall Gini coefficients
of China and decompose the inequality into
urban-rural areas. For India, the paper examines
the overall Gini coefficients over different time
periods ranging from 1980-2010.
The paper also investigates fiscal reforms of the
two nations, their structure of social benefits
programs for urban-rural areas, labor mobility
restrictions, financial policies of inflation
subsidies, and investments credits to urban sector
to come at the conclusion of the increase in
disparity between two regions
Finally, we investigate the income inequality at a
larger scale, which we look at the trend of
inequality in other developing Asian countries .

Source: Chinese Statistical Yearbook 1978-2008 and Chen,

Jiandong and Hou, Wenxuan and Jin, Shenwu, A Review of
the Chinese Gini Coefficient from 1978 to 2008

Source: Yap, Josef. "Addressing Inequality in Southeast Asia

through Regional Economic Integration." (2013): 2-23. Research
Institute Network

Student research supported by grant from the Charles Koch Foundation

Uneven economic growth can also be perceived as

a stimulator of social mobility. While a minimal
level of income inequality may be considered
beneficial for an economy in the short run,
polarizing distribution of income can nurture
severe income inequality, and ultimately hamper
the long term progress of opulence of a nation.
Thus, prudent measures such as governments
efforts to efficiently utilize taxes and public
facilities should be taken to alleviate income
inequality in order to make the economic system
operated in both China and India, and more
broadly, in other developing Asian countries, more
sustainable.
In future research, we wish to investigate more
about other factors such as household structure,
spending and expenditure of
households,
employment structure among different regions in
China and India to come up with a more wellrounded conclusion of poverty and income
inequality

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