Rural-Urban Economic Disparities among China’s Elderly

changed very little when compared to the mid-1950s² (the within-urban inequality also
decreased during this period). However, that has been changing as more recent studies
suggest that income inequality has been growing since the late 1980s. For instance, urban
households saw their real income increase only at an average annual rate of 4.5 percent
between 1988 and 1995 (Khan et.al., 1999)

One of the least desirable consequences of the reform, thus appears to be growing
income inequality - the largest increase inequality ever recorded according to some
accounts (Yang, 1999).³ What is behind this rising inequality? Increases in rural-urban
income differentials were found by Yang (1999) to be the driving factor behind the rising
overall inequality in China (pp. 306). Yang relies on household survey data collected by
China’s State Statistical Bureau for the years of 1986, 1988, 1992, and 1994. The data
consist of urban and rural samples of China’s provinces of Sichuan and Jiangsu, in
proportion to their respective populations. Though limited in geographical scope this study
is relevant as it provides a measure of income distribution over time.

Other studies have addressed China’s perceived growing income inequality, by
focusing in either urban areas or in rural areas. For instance, Benjamin and Brandt (1999)
examined income inequality in rural China by comparing data for 1935 and 1995 and
concluded that the level of income inequality is essentially the same. The study uses
household-level survey data for villages in north and northeast China, a sample of 1,094
rural households. Benjamin and Brandt found a per capita household income Gini
coefficient of 0.42 in 1935 and 0.38 in 1995. In other words, a more equal distribution of
land does not seem to alter income distribution in a very significant way, due to
undeveloped and ineffective factor markets. An additional, and new, factor put forth by
the authors, and particularly relevant for the current study, is the institutional change that
the structure of households is undergoing - an increasing number of Chinese families are
becoming smaller and more of a nuclear type, in lieu of multiple-level generation-types.
This undergoing change may very well affect income inequality dramatically as it changes
the traditional redistributive role of the family. The elderly are especially vulnerable to

² There was a major decrease in rural inequality in the early 1950s as a result of land confiscation.

³ China’s Gini coefficient went from 28.2 in 1981 to 38.8 in 1995 based on official statistics (World Bank,
1997).

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