Research On Income Distribution Gap And The Growth-Poverty

In recent years, China has made remarkable achievements in economicconstruction, but the polarization of income distribution, the high level of inflation, thedefective Social Security system, all those brought a certain amount of pressure on theharmonious development of our society. The rich get richer, the poor get poorer. Theoutstanding performance of the unbalanced development of China’s economic growthand people’s livelihood is the problem of the growth-poverty, of which the root cause isa not quite reasonable income distribution system.On one hand, China has maintained rapid economic growth; on the other hand, anunexpected phenomenon appeared that the economic resources and social welfarewhich should belong to the low-income residents have not get enough increase. In thispaper, absolute poverty line of “$1a day” and relative poverty line of “InternationalPoverty Line Standard” were selected as the basis for calculation of related povertymetrics of China. We found that, since the reform and opening-up, the population underthe absolute poverty line has decreased, especially the rural absolute poverty, but thereis still a festering problem of relative poverty. There are different performances in urbangrowth-poverty and rural growth-poverty, mainly in rural poverty is absolute poverty,mainly in urban poverty is relative poverty, while rural absolute poverty and relativepoverty are both worse than the urban, and a huge gap exist between urban and ruralabsolute poverty.According to the Gini coefficient, Theil index and the Watts index values of China,the logical deduction and mechanism analysis; it shows that the generation of China’sgrowth-Poverty and the expansion of income distribution differences are intrinsicallylinked. It is pointed out that the growth-poverty problem is mainly affected by twofactors, economic growth effect and income distribution effect. The higher the rate ofeconomic growth, the faster the rate of residents’ poverty declined. And the role ofincome distribution effect is the opposite, the greater the income disparities, the morepoor. China’s rapid economic development is no doubt, but the increased benefitsbrought by the high rate of economic growth will be offset by the widening incomedistribution gap, which hinder the improvement of the living standards of low-incomepeople. So the key issue is to adjust the unbalanced relationship of our residents’ incomedistribution. In the view of initial income distribution, China’s income distribution differencessignificantly expanded within the rural,the urban and the urban-rural gap described byGini coefficient over years. And Theil index decomposition analysis found that theeastern, the central and the western regional disparities in income distribution iswidening, even the income gap within the region is greater than the disparities betweenregions. In the view of income redistribution, social security regional differences inChina tends to be lower, but the Gini coefficient values of social insurance are generallyat high level, and there is a huge development gap between various social insuranceprograms. Because the development of social security system in the western region haslagged behind the eastern region, the rural has lagged behind the urban; China’s socialsecurity system did not achieve the purpose of adjusting and reducing the income gap,but further widened the gap.Today, not only dose the reality of widening income disparities exist in China, butalso underestimated the residents’ real income differences due to a high inflation. Theimpact of inflation on the differences in the income distribution is mainly reflected indifferent proportions of consumption and investment between the high income earnersand the low income earners. The particularity that investment money does notparticipate in the actual consumption makes real purchasing power of income only theconsumption part influenced by the current inflation rate. In the context of inflation,low-income people prefer to increase consumption, and high-income people prefer toincrease investment, which leads to a greater gap of real income. Then theintensification of the income distribution differences promote to further increase in thelevel of inflation, which due to the different inflation expectations and economicbehavior preferences between the high-income and the low-income people. Bycalculating the urban and rural Gini coefficient based on the real purchasing power ofChina, it is found that the real income disparities is bigger than the nominal incomedisparities in times of inflation, and the higher the inflation rate, the greater thedifferences between the two. It is also verified that the digital reciprocal causationrelationship of inflation and income distribution differences on the basis of the LogisticRegression Model.For the correction of unbalanced relation of income distribution, we mustcomprehensive considered it respectively from the initial distribution process andredistribution process. The productivity differences in the urban-rural or in regions andthe constraints of the dual economic system are important reasons for the initial income distribution gap. Free movement of factor Labor will contribute to the reduction ofincome gap, but excessive advanced the capital market liberalization will increase therisk of income disparities exacerbation. As long as the regional productivity differencesexist, the per capita income gap will not disappear. Social security, taxation andgovernment investment are important means to adjust the income distribution relation,with decreasing intensity of adjustment progressively. To improve the rate of economicgrowth, government would like to take regional partiality in redistributive policies thatwill bring an increasing income distribution differences, while the widening income gapwill lead to lower average consumption level of whole economy, brought insufficientdomestic demand, resulting in a stagnant economic development, which we need to findthe equilibrium point between economic growth and reasonable income gap.This paper indicated that, for the prevention of the growth-poverty problem,strengthening the social security system is the key point, and financial social securityspending is the most effective and feasible means to improve the social security level.According to the Non-parametric model analysis, our existing social security spendinggrowth can not offset the high inflation for the wealth losses to the insured, the socialsecurity contributions paid by the insured person does not meet the objectiverequirements of social security spending growth. Therefore, the government shouldincrease the proportion of social security spending in the budget. On this basis, we shallstrengthen the inputs of education resource in the western rural regions, shall draw upthe local preferential policies to attract talent into the rural areas, shall improve thesocial security coverage of rural residents, shall control the level of inflation especiallyin the consumer goods, in order to achieve the purpose of improvement of local humanresources reserve, balanced regional economic resources, strengthening the socialsecurity efforts of the backward areas, thus a fundamental contribution to balanceChina’s economic growth and income distribution differences appeared.