China and India: Income inequality and poverty north and south of the Himalayas

China and India are the most populous countries of the World and also the two largest contributors to World poverty as assessed by the World Bank. This paper, focusing on the rural circumstances is the first study using microdata to compare income inequality and poverty in the two countries. We find that at the mid-1990s income inequality in rural China and rural India were relatively similar.Our results show that differences in mean income across regions are much larger in China than in India and accounts for a much larger proportion of income inequality in rural China. The proportion of the population falling under a poverty line set to US$ 1 per person and day in western China is similar to the corresponding proportion in several Indian regions but much higher than in the prosperous eastern part of China. Economic status in India is more influenced by education of household head than in China where fewer are illiterate. Common to both countries is that minority status as well as land status affect income and poverty.