Convergence Condition Of Urban-Rural Income Differentials

Abstract:In recent years, the urban-rural income differentials of our country become larger and larger, and it has exceeded the average standard of the world. If considering the recessive income of the urban residents, the urban-rural income differentials of our country may be the first of the world. This phenomena is not good to our countries' development. To explain the cause of the differentials, economist from foreign countries and china have done many researches, most of them think that economic system is the main reason, but they do not pay much attention to the determinants of economic growth. Of course, system may be one cause of urban-rural income differentials, but it is not the root reason. At long-term, economic growth differentials is the real reason of urban-rural income differentials. In this paper, the author explains the urban-rural income differentials by economic growth theory. By comparing neoclassic economic theory, economic theory with economic system included, and endogenous economic growth theory, the author chooses endogenous economic growth theory as tool. Because the former two theories suppose complete market, homogenous productive factors, degressive rewards, and same scale benefits, so according these two theories, the economic will be convergent in a long time. But endogenous economic growth theory do not agree with these supposes which do not accord with our countries' fact. And according to it, economic growth depends on human capital, knowledge accumulation, and technology advancement, and country with high technology, high human capital will grow faster. In this paper, the author analyses the relation among human capital, fertility, and income, then explains why the urban-rural income differentials of our country becomes larger and larger these years. By Lucas model and human capital accumulation theory, the author explains how human capital takes effort on economic growth, and proves that human capital is the key factor of economic growth. When comes to explain the relation between human capital and fertility, the author makes use of family decision-making theory: if parents choose high fertility, then the children will have low human capital. In our country, rural residents have high fertility and low human capital, while urban residents have low...