Research On The Income Gap In China

In this paper, we study the hot issues of the social and academic concerns--income gap. We learn on the basis of previous studies and set up a labor supply and labor demand model and a skill-biased technological progress general equilibrium model to analyzed the existence of skill-biased technological progress as well as the impact to income inequality.Combined with labor income and labor supply variation, we analyze the relationship between the changes in the labor supply and the changes in the labor income gap. Analysis showed:labor supply cannot fully explain the changes in labor income gap. Labor income gap is not only affected by labor supply, but also affected by labor demand.On the basis of results of the analysis of labor supply and labor demand model, we further study the impact of technological progress on labor demand and the income gap. Based on the theoretical model, we use the China Nutrition and Health Survey data (CHNS) to verify the impact of technological progress and labor supply relative to the income gap.The empirical results show that, during the period of1989-2009in China, there is skill biased technology progress, and is one of the main factors to expand income gap of skilled and unskilled workers. The skill biased technical progress, increase demand of the skilled labor, prompted the demand structure of the labor market in China is changed, thus expanding skilled and unskilled workers’income gap. In addition, changes of relative supply of skilled labor had significant influence on income gap as well. The increase in relative supply of high skilled labor can alleviate the income gap in a certain extent. Therefore, increase input in education, improve the level of education of our workers are effective measures to reduce the income gap.