Study On The Impact Of The Chinese-Style Fiscal Decentralization On The Income Gap Between Urban And Rural Residents

In recent years, the income gap between urban and rural residents is widening with the rapid growth of the national economy. In2002, the ratio of China’s urban residents’ per capita disposable income and rural net income was more than3:1for the first time and reached3.11:1. Since then, the ratio of the income between urban and rural residents continued to expand on this basis. The ratio of the urban-rural income broken3.3:1from2007to2009, which droped back to3.23:1in2010. If taking the housing, health care, education, transport and public services and other non-monetary factors into account, the income gap between urban and rural residents will be larger. Studies on the world-wide tells that the income gap of urban and rural residents in our country has reached high, we must find ways to mitigate this gap to prevent it playing the adverse effects from the further expansion of the gap on the continued stability of the economic and social development.Recently, the government has taken many measures in order to narrow the widening gap of the urban-rural income. Since twenty-first century, the central government has issued a series of measures to benefit farmers, and the majority of farmers get a lot of tangible benefits from these measures. But, with the depth implementation of the preferential agricultural policy, the urban-rural income gap has not been narrowed but been further worsen. Although the government take more efforts to narrow the income gap between urban and rural areas, it did not achieve the desired results. So we surmise that there will be deeper reasons in the China’s urban-rural income gap which the allocation policies can not resolve.Selecting the study on the influence of the Chinese-style fiscal decentralization to the urban-rural income gap as the theme, we attempt to further enrich the existing research, and provide some new theoretical ideas to further ease the gap of the urban-rural income. In this paper, we first learn the theoretical study on fiscal decentralization and urban-rural income gap at home and abroad, then, we focus on studying the impact of the Chinese-style fiscal decentralization on urban-rural income gap in China. Specifically, we get the main conclusions in this paper are as follows:First, we analyzed the development status and influencing factors on the urban-rural income gap, and verify the assumptions that the variation of the Chinese-style decentralization will take a significant effect on the change of the income gap between urban and rural residents. We analyzed the current development of the urban-rural income gap, and analyzed the structural differences in the income gap between urban and rural residents, take empirical test of the impact of the different source on the overall difference in income between urban and rural residents. Then we get the conclusion that the difference in wage and transfer income are the main reason causing the urban-rural income gap. We studied how did the change of the financial system--Chinese-style fiscal decentralization affect the income gap between urban and rural residents based on the analysis of the traditional influence on urban-rural income gap, and found that Chinese-style fiscal decentralization has caused a significant influence on the income gap between urban and rural residents.Second, we explored the mechanism of action of the Chinese-style fiscal decentralization on the income gap between urban and rural residents. At first, we expounded the theory of urban-rural income gap and Chinese-style fiscal decentralization. Then, we analyzed the path of the Chinese-style fiscal decentralization that affect the income gap between urban and rural residents. The changes in the structure of local fiscal revenue and expenditure influence the income gap between urban and rural residents. Chinese-style fiscal decentralization exacerbated the local policies by the urban bias behavior to strengthen the functions of the local government in economic construction, declined the proportion of total financial expenditure of the agriculture spending in the local fiscal expenditure, and declined the proportion of rural education and medical expenses, led the transfer expenditure long-term flowing to the urban residents, which affected the income capacity of the rural residents. Finally, we analyzed the the final result of affection from the Chinese-style fiscal decentralization on the income gap between urban and rural residents. Chinese-style fiscal decentralization exacerbated the differentiation of the public service between urban and rural, which led to a big difference in human capital existing in urban and rural areas and exacerbated the wage income gap of rural-urban residents. Chinese-style fiscal decentralization exacerbated the infrastructure gap between urban and rural, which led to the larger gap of production and management environment between the urban and rural and reduced the gap of operating income between urban and rural households. Eventually, the total income gap between urban and rural residents have been expanded.Third, we took the empirical analysis of the impact of the Chinese-style fiscal decentralization on the income gap between urban and rural residents from across the country and the central region. We validated the conclusion that Chinese-style fiscal decentralization infuence the gap of wage income and transfer income between urban and rural residents by distorting the structure of fiscal expenditure. We took the empirical analysis of the impact from the Chinese-style fiscal decentralization on the total income gap of urban and rural residents by establishing simultaneous equations model at the national level. We also analyzed the impact of Chinese-style fiscal decentralization on the wage income gap, business and property income gap and transfer income gap between urban and rural, according to the structural sources of urban and rural incomes. Through the empirical research, we discovered that with the reduction of the degree of fiscal decentralization, that is the proportion of the local budget revenues accounted for the total budget revenue decline, which will lead to the lower supply proportion of rural basic education and health care, the lower supply proportion of agricultural infrastructure, the lower supply proportion of the agricultural technology promotion expenditures, and the lower supply proportion of the agricultural spending. The reduction of these expenditures will exacerbate the income gap between urban and rural residents, and especially exacerbate the wage income gap and transfer income gap of urban and rural residents. Therefore, the lower the degree of fiscal decentralization, the lager the income gap between urban and rural residents.Finally, we suggest taking some fiscal countermeasures to alleviate the urban-rural income gap on the basis of the analysis in the previous chapters. We suggest that we should reform the existing performance appraisal system to strengthen the public service functions of local government, improve the existing fiscal decentralization and improve the efficiency of fiscal spending; strengthen the agriculture spending to improve the capacity of farmers’income to ease the income gap between urban and rural residents.In this paper, we make the following innovation:First, we make the innovation on the research perspective. We break through the traditional research perspective, analyze the impact of financial system changes on the income gap between urban and rural residents. We take Chinese-style fiscal decentralization into an important factor that affect the urban-rural income gap in the analytical framework.Second, we make the innovation on the research contents. We not only study the impact of Chinese-style fiscal decentralization on the overall income gap between urban and rural residents, but also discuss the influence of Chinese-style fiscal decentralization on the income gap in structural differences between urban and rural residents. We not only consider it from the national level, but also research it in the less developed areas such as Jiangxi Province.Third, we make innovation in research methods. In this paper, we constructed a simultaneous equation model and take analysis of the income gap between urban and rural residents. In our study, we analyzed the impact of Chinese-style fiscal decentralization on the changes of the structure of the local fiscal expenditure, which will influence the difference in public goods’and services’supply between the urban and rural residents from the perspective of revenue decentralization. We analyzed how does the impact of the Chinese-style fiscal decentralization on the change of these indicators cause the alteration of the income gap between urban and rural residents.