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Based on the provincial data on annual per capita net income, inequality and poverty incidence since 2000, this paper attempts to analyze the impacts of the income growth and distribution on poverty reduction in rural China and further explores changes and causes of rural income inequality by means of econometric model and Gini coefficient decomposition. The results show that the income growth of China’s peasants still plays a significant role in reducing rural poverty, but the deterioration of income inequality will partially offset the positive effects of income growth on poverty reduction; the extent of income inequality in rural areas is obviously higher than that in urban areas; income from wage and salary is one of the most important determinants which causes rural income inequality, followed by the income from household operations, but the ratio of contribution of the income from property and transfer to inequality is relatively low.


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