Empirical Analysis on the Marketization Process and the Urban Resident’s Income Gap in China

Abstract

The debate on the relationship between China’s income gap and marketization is ongoing. The influences that different modes and aspects of the marketization process have on the income gap have been theoretically analyzed in this article. From the empirical aspect, the statistical yearbook data of various provinces are used to calculate the Gini coefficient of urban residents’ disposable incomes from 1997 to 2010, and then to investigate the effects of the marketization process and other factors on the income gap. The empirical results confirm the theoretical hypothesis: The overall effect of marketization is to narrow the income gap significantly. The empirical analysis also shows that the main reasons for China’s increasingly expanding income gap lie in the promotion of education and in insufficient employment opportunities. This indicates that the human capital of the employed and market risk have become crucial factors affecting China’s income distribution. The influence of the aging population structure transition, economic growth, and other factors impacting the income gap is investigated. Corresponding policy recommendations on how to narrow the income gap are proposed.