First, how much of the observed increase in inequality in Asia can be attributed
to the changing dual economic structure and urbanization? The answer is highly
country-specific. Urbanization contributed about 300% of the increase in inequality
at the national level in the Philippines, more than 50% in Indonesia, slightly
less than 15% in India, but helped reduce inequality somewhat in the PRC. The
change in the urban–rural income gap, on the other hand, contributed about 50% of
the increase in inequality at the national level in India and about 33% in the PRC,
but helped reduce national inequality in Indonesia and the Philippines. In the PRC,
the most important contributor to rising national inequality was an increase in rural
inequality, accounting for 43%, in contrast to what has widely been believed. This
emphasizes the importance of a widening urban–rural income gap and rising urban
inequality.