inequality in education outcomes.<sup>11</sup> Our results suggest that inequality in education started to narrow as the households with less education tended to gain more thanks to the nine-year compulsory education. As education is a key factor of production and the differential of returns to education increases over time, the narrowing of gaps in education can contribute to harmonizing income distribution in the long run.

Inequality of income can be inevitable at a certain stage of development. However, inequality of opportunity will undermine long-term prospects for development (The World Bank, 2005). Human capital is an asset that ultimately conditions the wealth of a nation. Continuing to improve market efficiency and investing in people, in particular equalizing opportunities and accessing to education and improving education services in lagging areas to poor people, are important for sustainable growth and equitable distribution in the long run.

# **References**

- Bishop, J., Luo F., Pan X., 2006. Economic transition and subjective poverty in urban China. Review of Income and Wealth 52(4), 625--641.

- Bourguignon, F., 2002. The Distributional Effects of Growth: Case Study vs. Cross-country Regressions. Paper presented at CEPAL, Santiago de Chile, in August 2001. Mimeographed, revised version.

- Bourguignon, F., 2003. The Growth Elasticity of Poverty Reduction: Explaining Heterogeneity across Countries and Time Periods, in: Eicher, T., Turnovsky, S. (Eds.), Inequality and growth: Theory and Policy Implications. The MIT Press, Cambridge, pp. 3--26.

- Bourguignon, F., 2005. Poverty-growth-inequality triangle: With some reflections on Egypt. Distinguished Lecture Series, No. 22. Egyptian Center for Economic Studies, Cairo, Egypt.

- Chaudhuri, S., Ravallion, M.,  2006. Partially awakened giants: uneven growth in China and India. Policy Research Working Paper, No. 4069. The World Bank, Washington D.C.

- Chen, S., Ravallion, M., 2007. Absolute poverty measures for the developing world, 1981-2004. Policy Research Working Paper , No. 4211. The World Bank, Washington D.C.

- Chen, S., Wang, Y., 2001. China’s growth and poverty reduction: recent trends between 1990 and 1999. Paper presented at a WBI-PIDS Seminar on Strengthening Poverty Data Collection and Analysis held in Manila, Philippines, April 30-May 4, 2001.

- Chotikapanich, D., Rao, D.S.P., Tang, K.K., 2007. Estimating income inequality in China using grouped data and the generalized beta distribution. Review of Income and Wealth 53(1), 127--147.

- Datt, G., Ravallion, M., 1992. Growth and Redistribution Components of Changes in Poverty Measures: a Decomposition with Application to Brazil and India in the 1980s. Journal of Development Economics 38(2), 275-295.

- Dollar, D., 2007. Poverty, inequality and social disparities during China’s economic reform. Policy Research Working Paper, No. 4253. The World Bank, Washington D.C.

- Dollar, D., Kraay, A., 2002. Growth Is Good for the Poor. Journal of Economic Growth 7(3), 195--225.

- Fan, S., Zhang, L., Zhang, X., 2002. Growth, Inequality and Poverty in Rural China: The Role of Public Investments. International Food Policy Research Institute, Research Report 125.

- Fang, C., Zhang, X., Fan, S., 2002. Emergence of urban poverty and inequality in China: evidence from household survey. China Economic Review 13 (2002), 430--443.

FAO, 1998. The state of food and agriculture 1998. FAO, Rome.

> 11 For example, in 1998, per pupil expenditure in Beijing was 12 times that in _Guizhou_ ; and the difference jumped to 15 times in 2001. On average, rural labor force has four years less schooling than urban labor force.

21