China has one of the largest and rapidly growing economies in the world. Although major reforms have steered the country’s economy since 1978, her economy has been characterized by increasing economic inequalities that no another country in the world has experienced (Xie and Xiang 6929). In fact, the Gini coefficient of the China’s economy is about 0.5, a significantly higher value than that of the United States (0.45). Such findings raise public and international concerns on the cost and implication on China’s economy. The phenomenon continues to create a social and economic gap between the China’s rich and the poor citizens. This internal assessment aims at describing the income inequality in China’ Economy by using statistic and Gini coefficient.
CHINA GINI COEFFICIENT
The Gini Coefficient is a well understood and utilized measure of inequality. Depending on the distribution of units in a sample or a population, the Gini coefficient measures the dispersal and distribution of shared resources (Kawachi et al. 127). While Gini coefficient of 0 indicates perfect equality, the Gini Coefficient of a unit of 1 expresses a total inequality where only one group or unit share all the resources. As expected by the increasing inequality in China’s economy, her Gini Coefficient is projected to be significantly higher or nearing unit 1. The rise of Chinas GC is in coincident with the rising and growing economy the country experience (Sutherland et al. 36). Such coincident may create a perception by the general public that rising and growing economy translate to increase in inequalities.
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There are five indictors in any population of state or a nation that indicates economic disparity. Such include poverty rates, poverty gaps and disparities in household income. Additionally, public cash transfer, capital income and social security contributions all indicates the economic distribution in a population. With the need of each member in household considered, the economic inequality is the function of the total contribution each household makes. The Gini coefficient expresses the ration of household income contribution with that of the proportion of the entire resources. S/90/S10 represents the ration of the 10 percent richest population of the community while the other 90 represent the poorest population. The median income represent that in the half or the P50/P90.
The data in this inequality assessment is based on a Survey done by the China Family Panel Study. 25 provinces of China, which include Inner Mongolia, Tibet, Xinjiang, Ningxia, Hainan and Qinghai conducted by the CFPS, is a standard representation of the mainland China and will be used in this assessment. The survey, which had completed over 14000 sampled households, list f question, was generated to solicits information on inequality related factors and determinants. Such included information on labor income, business, investment, transfer and income from various other sources that support total family income. Several other income Survey has been utilized in the bid to compute the Gini coefficient.
GINI COEFFICIENT
Gini coefficient is normally a measures the level of inequality. Typically, the coefficient is defined as the ratio of the values between 0 and 1. Gini coefficient is perhaps one of the oldest and the most used measurement method for inequality available today. Regardless of the sizes, Gini coefficient will compare two populations efficiently without any deviation. Although the actual computation of Gini Coefficient is complex and grim, the graphical representation is easy and simple to understand.
Financial analyst and economist have devised several methods to compute the Gini coefficient for a dataset. For those researchers familiar with Calculus and spreadsheet analysis, a smooth Lorenz curve can be used in the determination of the Gini Coefficient. In such case, Gini coefficient is normally the ratio of the area under the Lorenz curve. The ratio varies between 0 and 1and is always given in percentage. However, the date must be enormous or he enough to produce a smooth curve. Likewise, various other estimation methods such as trapezoids, rectangles, and Monte Carlo integration will provide reasonable estimates. Finally, one can estimate the Gini by directly using the algebraic formula if the data is ordered and rank in the right way.
Gini Coefficient is given by the formula;
G= SUM(i=1to n) SUM(J=1 to n) ABS(DataPoints i-Datapoints (j))/(n*nAvearge DataPoints))
To compute the Gini coefficient, we will use data obtained from seven different sources. The past and the present data will be of particular importance in this study. We compare two the Gini coefficient of China from the 1980s to 2012. The data was obtained from several surveys conducted on the income and other economic indicators in China. The rise of Gini Coefficient in China has largely been associated with rapid economic growth and reformation since the 1978.Over the past 30 years, china have had associated with GDP increase.
A classical Inequality calculations is as follows
EXPLANATION
Most Economist and sociologist suggest that economic development and inequality disparity takes an inverted U. Inequality first increases in the early stages of a country’s economic development and steadily decreases as the country stabilizes. Numerous studies from various researches indicate that the indeed inverted U is a clearly express economic inequality in a growing economy. The graph and the calculations computed indicates that China has experienced a significant and a rising economic inequalities in since the industrial reformation. Although numerous literatures and publications indicates that China’s economy has experienced tremendous growth in economy, there is inarguably fact that economic inequality has been phenomenon in the last three decades.
As demonstrated by the graph, in 2008, the country experienced the worst economic inequality in the entire three decades since industrial reformation. The process has increased until 2012, where the Gini Coefficient gradually reduced from a higher unit to a lower one. A Gini coefficient of 0 indicates a perfect equality while that of 1 express total inequality.
CONCLUSION
Gini Coefficient is perhaps the oldest and the most widely used measure for economic and income inequality in literature. China has had huge economic success in the past three decades. However, this success has been immensely clouded by huge economic inequalities among her citizens. Since the industrial reformation in 1980s, China’s Gini coefficient has steadily increased from around 0.4 to 0.6 creating a vast income disparity. This math assessment has computed and calculated this coefficient from data obtained from various surveys.
