Urban-Rural Income Disparity And Initial Condition For The Rural Endogenous Economic Growth

Along with the persistent farmer's depressing income-generation, the urban-rural disparitygreatly got enlarging in the last few years. Appallingly in 2003, the number of extreme povertypopulation of our country increased 800,000, which has first time reversed the previous decreasingtrend since the early reform. This shocking reverse might be the signal and testimony of economicdeterioration in some poverty areas, especially in the poorest areas located in the west-mid China.Moreover, it can be theoretically sorted out that, in the context of the enlarging urban-ruraldisparity, the urban economy has been turning to a high level equilibrium point or keeping apositive growth rate in the long run with the contribution of the higher capital stock per capita, aswell as the higher human capital stock level in particular. By contrast, the poor rural economy hasbeen unexpectedly getting into the lower level because of the capital disadvantages which is lowerthan the initialcondition, and even falling into the poverty trap and staggering up and down in thelow level equilibrium. And what makes it more wrecked is that the rural poverty pitfalls can't begot through under the current economic development pattern. This has laid ahead a real challengethat China has to face. Putting aside the institution factors which are often touched upon in a huge number ofresearches, this paper has identified that the different kinds of investment could be a profoundexplain of the disparity between the urban and the rural with an econometric regression model.The results of the research reveal that it is imperative to increase the common infrastructureinvestment and advance the level of the farmers'education. Furthermore, the paper introduces the information theory to enlarge the research anddistinguish two different kinds of the rationalities: instinct rationality and real rationality with aneye to the theory of the rational mini-farmer brought by the agricultural economist, Schultz. T. W. In the last, the research applies the principal-agent theory to offer a new explanation for theurban-rural income disparity.