Study On The Institutional Transformation, Economic Development And Urban-rural Income Gap In China

Since the reform and opening up, the income of residents in China grow rapidly, and the urban-rural income gap also increases greatly. The large urban-rural income gap has become an important factor restricting our economic development. Thus, it has great practical significance to understand the reason of the widening income gap between urban and rural areas.The urban-rural income gap is a comprehensive problem, the purpose of this study is to explain the expansion of China’s urban-rural income gapthe from perspective of initial distribution and institutional transformation. The reason why we choose this perspective is that the existing research can not explain the problems of urban-rural income gap in China accurately. The research method of existing research is to see the urban and rural areas as two relatively independent regions, so they can explain from the economic development of the two areas, which determin the income of resident income, and which is determined by the difference of production factors (mainly the number of capital) of the two regions. The main problem of research method is from this perspective can not explain why the urban-rural income gap before the reform and opening up staied at a relatively low level of long-term stability, while the production factors had the same difference in this perioed. Another problem is that, even the urban and rural can be seen as two relatively independent areas in the short-term, buet in the long-term, they should be seen as a whole.Seeing from the theoretical basis of the existing research, the key problems of this research perspective is its theoretical basis is deficient in explaining the economic growth. Most of the existing research based on the mainstream macroeconomic growth theory and development economics; however, many economic phenomena can not be accurately interpreted from these theories. The profound reason is they regard the capital accumulation as the main reason of economic growth, so the economic growth is a continuous process of factor accumulation and configuration. However, economic growth is not only a process of quantitative change about factor accumulation and configuration, but also is a process qualitative change about division of agriculture and industry. So the key factor to understand how the economic development is affected by the evolution of division of labor and changes of the economic structure. Unlike the existing research,,based on the theoretical framework of the new classical economics, this paper The division study from the perspective of evolution of division of labor, which determine the economic growth, and then determine the income level. The more important point is that this framework cans incorporat institutional factorsed into the analysis of economic growth. The economic institutions determine the economic growth and income levels by affecting the efficiency of the transaction which determines the level of division of labor. This theoretical breakthrough provides a theoretical feasibility to study China’s urban-rural income gap from institutional transformation for this paper.Referring to previous studies, the third chapter sees the urban and rural areas as tow regions. Combined with the study of change of our market-oriented reforming and urban-rural income gap, the dissertation presents the idea that, the main reason resulted in China’s urban-rural income gap is the different economic institution between the urban and rural areas, which was resulting from China’s gradual reforms, that led to a different division of labor, and then the level of economic growth and income levels. Simultaneously, China’s policy of opening up also expanded the urban-rural income gap by improving the level of division of the industrial sector. Relevant empirical researches support these conclusions.Based on of the third chapter, Chapter four saw the urban and rural economy as a whole through the perspective of the urban and rural labor mobility. This chapter focuses on how the polices of migration limition of urban and rural labor and the changes of those polices affect the urban-rural income gap in China. Both the theoretical and empirical analysis show that, labor mobility restrictions is one of the important institutional factors that result in China’s urban-rural income disparities; both in the context of free movement of laborand labor mobility restrictions, labor mobility can narrow the urban-rural income gap; but in the conditions of labor mobility restrictions, the role of labor mobility to narrow the income gap between urban and rural areas may can not reflect due to the effects of other factors. This conclusion can be used to explain the phenomenon of the simultaneously expanding of China’s labor mobility scale and urban-rural income gap.Overall, the reason for China’s urban-rural income gap disparities is that, in the context of urban and rural labor mobility restrictions, it is the differences of urban and rural economic development which determined by institutional transformation that determines led to the urban economy developed faster than rural economy, then the income gap between urban and rural residents expanded. Therefore, the feasible way narrowing the urban-rural income gap in China is to reform of the relevant economic system. Specifically, relaxing restrictions on labor mobility in urban and rural areas, and accelerating the market-oriented transformation of the rural economic system. These practices are not only conducive to narrowing the income gap between urban and rural, but also conducive to promoting China’s economic growth. In addition, as the problem of income gap between urban and rural areas is a comprehensive issue, some other policy recommendations to narrow the income gap between urban and rural areas has also been included in this analysis, such as income redistribution reform and agricultural industrialization support and so on.