The U.S.-Sino different links between income and consumption inequality

ABSTRACT This work shows that the U.S.-Sino diverse links between income and consumption inequality have to do with their different development levels and policy orientations. Foreign trade, financial markets, and capital flows are used for consumption smoothing in the U.S. but for economic growth in China. Other smoothing schemes are better developed in the U.S. than in China. As a result, income and consumption inequalities are linked loosely in the U.S. burdened with an external deficit but closely in China faced with a persist surplus.