Gap And Integration Of Urban-Rural Economies In China

Based on definition of two fundamental concepts of "Rural" and "Urban" from point of economics, this paper proposed a new theoretical framework of dual economic structure in China. Through calculation of GDP in urban and rural areas, this paper established a new dual sectors methodology rather than traditional analysis of agriculture and non-agriculture. Employing the statistical techniques econometrical models, this paper measured the divide and its trend between urban and rural economy since 1978, determined the impact of labor allocation between urban and rural areas on growth of labor productivity in China, and discussed the driver behind the economic growth in urban and rural areas as well as way towards integration of urban and rural development. Methodology applied in the paper has a contribution to research on dual economic development to some extent, conclusion derived will enrich the knowledge and understanding of urban-rural economic relationship in China, and provide valuable reference to policy-makers on integration of urban and rural development.The overall conclusion of this paper indicates that the macro economy has always been characterized by dual economic structure of urban-rural areas since 1949, while in the traditional planned economy period, the dual structure was strengthened tended during the 1949 and 1978 , but tend to be weakened and urban-rural economic development divide narrowed since 1978 when the reform and opening up began, mainly attributable to the development of town or village enterprise (TVE) on behalf of rural secondary and tertiary industry. This study found that the year of 1992 was a dividing point of relationship between urban &rural areas and industrial & agricultural sectors, when the relationship of urban & rural areas dissociated that of industrial & agricultural sectors which was identical before. The paper also noticed the contribution of rural migration workers to national labor productivity growth became unobvious, mainly due to restriction of China's household registration system and the natural growth of the labor force within urban and rural areas, weakening the effect of labor allocation between urban and rural areas. This study found that both the growth of urban and rural economy were mainly driven by the capital input during the 1995 through 2006, while marginal output of capital investment in rural area being always higher than that in urban regions. Simultaneously, economic restructuring has made a significant contribution to rural economic development, and human capital to urban economic development also. however, it was not statistically significant that the role of technological progress in economic growth. The paper also found, that marginal output of urban human capital had always been higher than that of rural, but the gap had been narrowed gradually. We could notice that the trend of human capital is towards the integration of urban and rural areas, but it will take long time to realize the integration.This paper suggests that the continued rapid economic growth in urban, especially and rural areas since 1978 show that overall strategies and policies related to urban-rural development are correct and stable.Based on empirical analysis and conclusion derived, the paper brought forward policy implications as followings: (1) to emphasize the concept of Integration of Urban and Rural Development (IURD) as one of national strategies. (2) to maintain the basic policies concerning urban and rural development continuous and stable. (3) to pay more attention on rural secondary and tertiary industries as well as on agriculture. (4) to optimize urban economic structure, promote the development of tertiary industries.(5)to speed up the reform of urban and rural household registration system, and to promote the urbanization of rural migrant workers. (6) to improve education & training for farmers in order to strengthen the building of rural human capital. (7) to optimize the allocation of urban and rural production factors, accelerate the urban and rural economic integration.There are three main innovations in the paper. First, a theoretic innovation is applied, which put forward a new theory of dual economic structure in China based on the household registration system and labor market segmentation of urban and rural areas. Second, is the methodological innovation is employed, which established a new dual sectors methodology of urban-rural areas rather than traditional analysis of agriculture and non-agriculture. Third, result innovation is produced, which proposed some new ideas about China's dual economic structures unlike other studies.