The Causes Of Income Inequality In China

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Along with rapid growth of the economy, the wealth gap is becoming wider in China, causing even worse income inequality. According to the report published by China Family Panel studies, one-third of the country’s wealth belongs only to the top 1 percent of the population, while the bottom 25 percent only owns 1 percent of the total wealth. Such tremendous gap between the rich and the poor indicates strong inequality in the distribution of income in China. In fact, changes in the Gini coefficient, which is a tool that measures income inequality in a country, clearly show how China has become more inequitable. The article writes that back in 1980, China’s Gini coefficient was at 0.3, however it has increased to 0.49 in 2012. Based on the information given in the article, it is possible to draw a Lorenz curve, which is a graphical representation of the income distribution of a country.
In Lorenz curve, the closer the curve of a country to the line of absolute equality is, the more equal the income distribution of income is. As shown in the graph above, cumulative 25 percent of the total population only owns 1 percent of the total income. In addition, the difference between the cumulative percentage of total income of 99 percent of the population and the entire population suggests that the top 1 percent owns about one-third of the total income. Consequently, the curve for China is far apart from the line of absolute equality, which clearly indicates that the distribution of

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