Question

By 2001 China’s overall Gini coefficient has increased to 0.477. China is more unequal than the average middle-income country. So state the main reasons for China to have such high inequality. What solutions would you recommend? So basically you have to explain what Gini coefficient is and then explain why China has such a high inequality

Answer 1

Answer:

GINI Index: Gini coefficient is an index that measures the inquality based on the lorenz curve analysis. It ranges from 0 to 1, where 0 and 1 represent perfect equality and perfect inequality respectively. Perfect inequality means all the resorces or interest parameters holds by only one individual.

Since the economic down of China after liberalization, China has experienced unprecedented economic prosperity. As great late economist Milton Freidman said "there is no free luch". This economic prosperity has been come with huge cost in the form of economic inequality. The gap between rich and poor in increasing in a pace manner that is also unprecedented. So what are the factors that contributes in this economic phenomenon? The single most factor is “inequality of access to education". In China, across people contemporaneously and across generations this gap has been increased. As factor decomposition says that large part of income comes from the income earned from return on education. Another factor is the regional inequality, inequality between rural and urban regions has increased significantly due to improper reachness of industrialization. Another an important factor is "change in the demographic structure of household". Due to the "one child plicy" family has been left with low number of earning members. Possibiliy source of hard earned income for poor and marginalized households was number of member those can work while rich has other source of income in the form of capital return, profit, interest and entrepreneurial return. This contributed in the increasing gap between household income.