The article examines China's income distribution from 1985 to 2001 and finds that inequality has increased significantly in both rural and urban areas. The study shows that the gap between rural and urban incomes has been a major factor in the overall rise in inequality. In the United States, on the other hand, inequality is mainly driven by disparities within rural and urban areas. The researchers also discovered that urban consumption inequality has risen notably, which could be a better measure of economic well-being than income inequality.