Economic Growth, Income Distribution And Poverty In Rural Areas

Poverty reduction is the primary goal of development. China has had the largest poverty population in the world. With the rapid economic growth and government's full-swing poverty alleviation work, China's rural poverty incidence has dropped dramatically after reform and opening up. China's poverty reduction over the last 30 years has been remarkable, and is the main reason caused worldwide poverty reduction. At present, the tendency is increasingly obvious that China's rural poverty population concentrated in the areas with harsh natural conditions and relatively slow economic growth rate such as Gansu province. Gansu has been one of the provinces which still have serious poverty problem in China.There is a complex and interactive relationship among economic growth, income distribution and poverty. The dynamic changes in poverty results from interaction of economic growth and income distribution. To clarify the relationship among them will help us understand the causes of poverty and its development trends, thus formulate the proper economic development policy and poverty alleviation policies.The thesis studies the rural poverty issue in Gansu province, adopting the combined methods of theoretical analysis and empirical analysis. The thesis firstly discusses the relationship between economic growth and rural poverty, income distribution and rural poverty, economic growth and income distribution, and then from the perspective of PGI Triangle (Poverty-Growth-Inequality Triangle), with the method of decomposing the factors affecting poverty change, the thesis tests the effects of economic growth and income inequality on the rural poverty in Gansu province.This thesis firstly introduces the poverty population in rural area of Gansu province and its change, the changing nature of poverty, the causes of rural poverty in Gansu province, and summarizes the history of the fight against poverty in Gansu province, the successful experiences in poverty alleviation and the main problems at present. Then, using the cointegration analysis and Granger causality test, this thesis empirically researches the relationship between economic growth and rural poverty in Gansu province, and concludes that growth is the main force to reduce rural poverty and poverty reduction is good for economic growth. We analyzes the poverty reduction mechanism of economic growth, and asserts that in the means of improving labor participation rate, increasing the returns of production factors such as labor and land, as well as increasing the government's transfer payment, economic growth leads to poverty reduction. Through the decomposition of economic growth by sectors, this thesis finds that the growth of primary sector had the most significant effect on rural poverty reduction. This thesis analyzes the reasons of the marginal effect of diminishing returns of growth on poverty reduction, and proposes some "pro-poor growth" measures.According to the study on the relationship between income inequality and rural poverty, in essence, the poverty issue is the inequality issue at the present stage. The inequality has led to the emergence and aggravation of poverty, even intergenerational transmission of poverty, resulting in polarization and income inequality expansion. In addition, from the perspective of the income structure the thesis studies income disparities between provinces. It concludes that changes in the income structure and distribution of income differences are the important reason for income gap increase among provinces. In this paper, empirical analysis shows that the income level of rural residents and income inequality accord to inverted U hypothesis in Gansu province, and the increasing degree of income inequality promotes income increase of rural residents.Finally, from PGI perspective, the thesis studies the effect of economic growth and income inequality on poverty changes in Gansu province. Through the decomposition of poverty changes, it is found that economic growth played a significant role on rural poverty reduction during the period of 2001 to 2007, but income distribution's impact on rural poverty reduction showed a larger difference.