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Income Inequality and Economic Growth
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An Analysis Based on
China蒺s Provincial Panel Data
GENG Dewei
(
Department of Economic Forecasting
,
State Information Center
,
Beijing
,
100045
,
China
)
Abstract
: China has achieved rapid economic growth and millions of people have been out of poverty since 1978. But since
then, another phenomenon that has been eye鄄catching is the rising income inequality. Based on provincial panel data between
1987 and 2005, this paper finds an inverted U curve relationship between the income inequality and the level of economic devel鄄
opment, and the turning point shows up when the GDP per capita reaches circa ¥ 15870 (1987 price level). This paper also
finds an inverted U curve relationship between inequality level of last period and economic growth rate of current period. We
haven蒺t come to any consistent conclusion about the effect of changes in inequality on economic growth.
Key Words
: income inequality; economic growth; inverted U鄄curve
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