Social living groups are organised in social hierarchies often exhibiting inequalities in beings. Investigating class segregation and the use of punishment applied downward in the rank acts as a key aspect to ascertain how dominant and subordinate partners cooperate to achieve mutual profit. In human subjects coming from countries with an uneven wealth distribution, this mutual profit may be reduced, especially for the lower socioeconomic classes. We implemented an Iterated Prisoner’s Dilemma Game experiment in one such country with starkly high inequality, China. We split relatively richer and poorer subjects into separate classes and gave only one the authority to punish the other. When rich subjects could unidirectionally punish poor subjects (as in a segregated society), rich subjects decreased their cooperation effort while punishing poor subjects. When rich and poor subjects, instead, could punish each other in random combinations (as in an integrated society) they decreased defections so they could punish more. In the segregated society model, the punishing classes earned twice as much as the non-punishers. Conversely, in the integrated society model, weak differences in earnings were found, leading to a decrease in inequality. These results were confirmed by an agent-based simulation mirroring the human experiments and repeated during a very large number of rounds. From our research, we conclude that, especially in developing economies, if the states enacted that the dominant and subordinate individuals relinquished their almost segregated state, this would lead to a redistribution of wealth and power.