CentER

Haoran Pan

Abstract:
This thesis applies a computable general equilibrium model to China

to explore what perfect competition would do to income distribution in China. The research analyzes this question by determining personal income distribution under hypothetical, perfectly competitive conditions, where factors are rewarded according to their marginal productivities. Comparison with the observed personal income distribution reveals dramatic changes. In particular, the income inequality between social classes will grow. The income inequalities between areas and provinces will also increase, even though their shares in the overall income inequality will decrease. Competition would dissolve the existing negative relationship between the levels of economic development and of income inequality across provinces.