The Stylized Facts of Income Inequality in Mainland China, Korea and Taiwan: Development and Comparison

This article explores Taiwan and Korea’s development path with income inequality and compares mainland China’s growth path with that of the two economies to explain why mainland China failed to prevent the intensifying income inequality. The land reform in Taiwan promoted income equality in the agricultural sector, while the decentralised industrialization model established the labour-intensive sector in both urban and rural areas to absorb the labour surplus. Korea also had land reforms to help its rural area grow and it developed human capital via universal elementary and secondary education which avoided high unemployment. Urban-rural disparity accounts for much of mainland China’s inequality. Land and agricultural reform alleviated the problem to some extent, but the Hukou Registration System allowed urban inhabitants’ exclusive welfare rights to persist. Marketisation and privatisation created a huge workforce excess. In rural areas, excessive workers could not easily find non-farm jobs outside the village and town businesses, while in urban areas, labour surplus from shrinking state sectors could not fulfil the demand of the newly forming private sector owing to poor skill and productivity. Geographic and institutional factors differed mainland China from Taiwan and Korea. Unlike tiny territories, mainland China has different areas with varying natural circumstances, making industrialization and modernization harder in certain places than others. Institutionally and politically, mainland China emphasised economic development and rapidly developed its capital-intensive and service industries. Labour-intensive industries, which suit low-skill employees, did not grow proportionally. Meanwhile, mainland China’s Hukou Registration System hindered labour mobility, limiting certain employees’ income-boosting job possibilities.