Chen Gong, UNU-MERIT
In today's globalized world, income inequality presents a serious challenge with far-reaching implications for social cohesion, economic sustainability, and quality of life. As disparities widen, understanding the dynamics of income distribution is crucial for crafting policies that promote equitable growth and social harmony.
This study, using a novel microsimulation-based decomposition methodology, analyzes national, intra-provincial, and inter-provincial income disparities and convergence trends. The findings reveal that labor market transitions, particularly shifts from agriculture to formal employment, have significantly reduced inequality. Urban-rural mobility also plays a key role, while returns to labor and capital have a modest impact. However, the limited effectiveness of social security systems highlights the need for stronger policy interventions in less developed regions. This research offers crucial insights for promoting inclusive growth and shaping effective economic policies.
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