  Urban-rural gap and regional inequality are long standing problems in China
and result in considerable number of studies. This paper examines the dynamic
behaviors of incomes for both urban and rural areas with a prefectural data
set. The analysis is conducted by using a distribution dynamics approach, which
have advantages in examination on persistence, polarization and convergence
clubs. The results show that persistence and immobility are the dominant
characteristics in the income distribution dynamics. The prefectural urban and
rural areas converge into their own steady states differentiated in income
levels. This pattern of urban-rural gap also exists in three regional groups,
namely the eastern, central and western regions. Examination on the dynamics of
the poorest areas shows that geographical poverty traps exist in both urban and
rural prefectural areas. Our results indicate that more policy interventions
are required to narrow down the urban-rural gap and to eliminate the poverty
traps in China.
