China has been experiencing large scale rural-urban migration and economic growth in the urban private sector since the early 1990s. At the same time, income inequality has increased substantially. We estimate separate labor income processes for different groups of workers. Rural workers face...

In this article, I discuss the role a progressive income tax system and a redistributive pay as you go (PAYGO) social security system can play in insuring and reallocating idiosyncratic as well as aggregate risk. I also argue that the underlying source of market failures generating such a role...