RURAL INDUSTRIALIZATION AND INCREASING INEQUALITY - EMERGING PATTERNSIN CHINA REFORMING ECONOMY

This paper's goal is to increase the understanding of the inequality t rends during the postreform period in China. It uses a rigorous, infer ence-based procedure to demonstrate that inequality among the countrie s in an east coast province registered statistically significant incre ases between 1984 and 1989. Decomposition analysis reveals that the ch anging patterns of inequality were closely associated with the changes in the structure of the rural economy. In particular, policies that i ncreased the importance of agriculture in the economy led to a reducti on in inequality; those that stimulated the expansion of rural industr y gave rise to greater inequality. One explanation is that barriers ke ep outputs, inputs, and information from flowing among regions, leadin g to higher inequality.