Income inequality, income mobility, and social welfare for urban and rural households of China and the United States

In the United States, there is little difference in annual income inequality and income mobility between the rural and urban sectors of the economy. This forms a sharp contrast with China where income inequality is greater and income mobility lower among rural households than among urban households. When incomes are averaged over three years and when adjustments are made for the size and composition of households, income inequality among all households differs little between China and the United States in the 1990s. Moreover when pooling rural households and urban households and when measuring annual income inequality and income mobility of the pooled households, the mobility of incomes of households in the United States differs little from that in China. Social welfare functions are posited that allow for a trade-off between increases in income and increases in income inequality. These suggest strong increases in well-being for urban households in China. The corresponding changes in rural China and in the United States are smaller. Four sets of data on households are drawn on to document these findings.