these changes, in addition to being most vulnerable when it comes to uneven factors
markets.
On the other hand, Khan et al. (1999) studied income inequality in urban China, by
comparing surveys for ten provinces undertaken in 1988 and in 19954. They found that the
income distribution in 1988 was “remarkably egalitarian”. Even though urban inequality
had increased somewhat, the Gini coefficient was still lower than for other countries.
However, the Gini coefficient for the distribution of household income per capita went
from 0.233 in 1988 to 0.332 in 1995, an increase of 42.5 percent (Khan et al. pp. 296).
They concluded “increased inequality in urban China was due entirely to greater inequality
in the distribution within individual components of income” (pp. 297) and that government
policy contributed to the growing inequality. Xue and Zhong (2003) finds that the urban
unemployment rate grew to 11.9 percent in 1999 and has caused urban poverty, which in
turn has contributed to the worsening of urban inequality. They conclude that urban
income inequality has increased since 1995 and that urban unemployment and poverty are
the major reasons.
This paper focuses on the income disparities among the elderly. The study
comprises both rural and urban households, and covers all China. However, it is more
restrictive than some of the previous studies to the extent that is only confined to elderly-
headed households.
The rural-urban divide
There is a very extensive literature on China’s historical rural-urban divide. The Maoist
centrally planned system embraced a development strategy development “that favored
heavy industry development and extracted agricultural surplus largely for urban capital
accumulation and urban based subsidies. The main enforcement mechanisms included the
state control of agricultural production and procurement, the suppression of food staple
prices, and restrictions of rural-urban migration via a household registration system. Prior
to the inception of reforms in 1978, capital goods were excessively concentrated in urban
areas, and a large fraction of the labor force was restrained from leaving agriculture. As a
4 The 10 provinces were Beijing municipality, Shanxi, Liaoning, Jiangsu, Anhui, Henan, Guangdong,
Yunnan, and Gansu. Sichuan was added in 1995.