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Wider Income Difference in Developed Countries and Inspirations for China(No.38, 2017)


By Shi Shujie, Department of Development Strategy and Regional Economy, DRC

Research Report, No.38, 2017 (Total 5113) 2017-04-07

Abstract: Developed countries twice experienced wider income difference respective between late 18th century and early 20th century and during some time after the 1980s. The differences were featured by the polarization in income distribution, yet the composition of the highest-income groups was different. The reasons were due to the drop of labor income share, highly concentrated capital and the government laissez-faire policy, but the declining labor income share witnessed different historical conditions. The income difference occurred in two different periods, but they both caused severe economic and political crises, with different most-impacted social groups. Inspirations can be drawn by comparison. First, it is necessary to highlight the negative impacts of serious income gap, instead of letting things go their own way. Second, income gap will not narrow by itself through economic growth, and the government needs to take some positive measures. Third, while enhancing the quality of equal opportunities, more attention needs to be paid to equal results. Fourth, the difficulty for China to narrow income gap lies in handling the challenges developed countries had experienced in different historical periods at the same time.

Key words: wider income gap, developed countries, comparison, inspirations