A Semiparametric Analysis Of The Reason Of The Rising Income Inequality

Along with the deepening of economic reform, the expanding income gap between different cities will lead to imbalance of development in various districts, which is a big problem in constructing harmonious society. Under this background, concerning about the expanding income gap is an important duty of government as well as a responsibility of all scholars in relevant field. Therefore, in-depth study of the problem of income gap, looking for the reason of it, and exploring ways to reduce the expanding income gap is not only related to improving the living standards of the people, but also having a positive impact on the overall strategy of building harmonious society.This paper discomposes the rising income inequality based on the income distribution to find the reason of extending inequality. The first chapter is mainly an overview of relevant works in this field at home and abroad. The second chapter is the theory of Nonparametric Kernel Density Estimation and the main idea of the Counterfactual Analysis. Next, using the nonparametric model, this paper estimates the income distribution of Chinese urban cities in 1995 and 2006. After that this paper analyzes the effects of the distributional changes in population, economic development attributes, employment and economic returns from economic development attributes. This paper investigates the impact of these different factors and finds that the changing tendency of income distribution can be explained well by the model applied. Through the analysis this paper founds that the economic returns have a major impact on the change of income distribution. Finally, this paper makes a summary of the expanding income gap, and offers some relevant policies should be carried out. The author hopes that this paper can provide useful reference of decreasing the income gap in different cities.