A Positive Study On The Elements Affecting The Rural-Urban Income Disparity In China

This thesis is a positive Study on the elements affecting the Rural-Urban income disparity in China. Based on the reflection of the basic theory on this issue, the author analyzes the status in quo of Rural-Urban income disparity and forecast its development trend, and its impact on the economy. The positive analysis firstly studies the relation among the rural-urban income and the economic development, and makes a quantitative analysis on how much the rural and urban people share in the fruits of economy development. Secondly, we analyze the relevant elements affecting the Rural-Urban income disparity and measure its impact via econometric model. We differentiate the economy elements into three variables: the rural industry, rural agriculture and urban economy. Using the panel data set of these three variables, we estimate their relation with the Rural-Urban income disparity. Lastly, we make a special discussion on the institutional elements, which are not easy to made quantitative analysis. The main conclusions and policies are as follows:1. Conclusions(1) The rural-urban income disparity in China is quite large, maybe the largest in the world. Since the mid of 80s in twentieth century, the rural-urban income disparity is on the trend of growing large, and we prove that if the status in quo not changes, this trend would keep on. The large income gap between rural and urban goes against the sustainable economy development, the realization of the well-off society in an all-round way, and the construction of harmonious society.(2) We make a Granger Causality test on the rural and urban income growth with the economy growth. We find that the GDP and urban income's Granger Causality are bilateral. But the GDP and rural income's Granger Causality is unilateral, which GDP is the unilateral Granger Causality of rural incomes, but only approximatively 5% level significant. And with the panel data analysis of GDP and incomes of household of rural and urban, we fond that the income elasticity of GDP on rural is slightly larger than urban elasticity. But the rural income not quite significantlydescended from 1997 to 2003, at the same time, the urban income significantly ascended.(3) We choose many variables stand for the relevant elements affecting the rural household incomes, and via multiplied regression model, we estimate their income elasticity. Sort by the elasticity in descendent order, we get the impact of these variable on the rural income is: The rate of population urbanization (0.230)>price index of agricultural product (0.161)> the proportion of labor not engaged in agriculture with total labor in rural (0.116)>total power of agricultural machinery (0.113)> cultivated land per rural people (0.090) >gross output value of fanning, forestry, animal husbandry and fishery (0.079)> government expenditure for agriculture (0.027)>gross output value of rural industry (0.036). And the income elasticity of rural education (by years) is 0.663, which is quite large compared to other elements.(4) We Use the panel data set of the rural industry, rural agriculture and urban economy estimate their relation with the Rural-Urban income disparity, found that though the rural industry have a certain contribution to the rural income, as a whole it do not contribute to the reduction of the income gap between rural and urban income. And still, there more than 50% of the income of rural people comes form agriculture. The stability of agricultural production is important for the rural income.(5) With the result of fixed effect of panel data analysis, we found that the regional location of the economy affect the rural-urban income disparity greatly. Accelerate the development of the west of our country will contribute to the reducing of the rural-urban income gap.(6) Institutional analysis show that Rural-Urban Dual Economy comes from the government leading industry overtakes strategy. And on the base of the rural-urban dual register of resident, there are a serial of discriminated policies, which contribute to the growth of rural-urban income gap. And these discriminated policies seen to be on the road of path dependence, makes it harder to reduce the rural-urban income disparity.2. Suggestions(1) We must pay great attention to the rural-urban income disparity, take it seriously and make it a long-term task to reduce this income gap.(2) We should stabilize the agricultural productions, and make great effort to transform the traditional agriculture.(3) Push forward the process of rural industrializations and rural urbanizations. Accelerate the convergency of township enterprise.(4) Quicken the reform of the Rural-Urban Dual Economy. Firstly, abolish the system of rural-urban dual register of resident. Secondly, abolish the discriminated policies, which contribute to the growth of rural-urban income gap. Thirdly, foster a national unification labor market. And lastly, unify the rural and urban revenue systems, reduce the rural-urban income gap via the finance transference.