The Study Of The Relation Between China's Economic Growth And Income Distribution

As the important economic targets, economic growth and income distribution are the foundations which promote the economy developing continually and steadily. The relationship between economic growth and income distribution is the important question discussed by the economic circles all the time. At present, although China's economic is growing speedily, the gap of income distribution appears expansive trend, directly or indirectly affects the development of society and economy. This paper attempts to study the relationship of China's economic growth and income distribution along with the factors that affect both of them by theoretical and empirical perspectives, explores the policy recommendations of harmonious development between China's economic growth and income distribution. The study is of importance in theories and practices.In economic circles, there are many academic researches about the relations of economic growth and income distribution which can guide the promotion of the economic development and lay an important foundation for future generations continuing deepen the study. Among them, the most innovative and representational theory is the"Counter-U hypothesis"raised by Kuznets. He considered that in a country's economic development process, it can be divided to some different stages in accordance with the level of economic growth. On early stage, economy grows with a high speed, the gap of income distribution expands rapidly. In the middle the period, economic growth keep steadily, then the gap of income remained stable. On later stage, economy gets into the mature stage and the growth slows, meanwhile the income inequality reduces. After the"Counter-U hypothesis", among the empirical researches on relationship between economic growth and income distribution by domestic and international scholars, a large part is rounding with testifying the hypothesis and the other part studied the direction of mutual influence and the factors have an effect on them. On the basis of domestic and international relevant researches, this paper analyzes in depth the relationship between China's economic growth and income distribution.Economic growth is the basis and condition of income distribution. Although economic growth provides material wealth for income distribution, but in the process of economic growth, there are many factors affect income distribution, the paper believes that these factors are the dual economic structure, the two tilt-development strategies, economic Reform and open policy. As a result of these factors, many kinds of gaps of income distribution in China is growing. Based on a large amount of statistical data, the paper calculates China's current income distribution gap. Through non-equal group method , the calculated Gini indexes show the state of Chinese urban, rural areas and the national income distribution, or whether rural or urban areas nationwide. The data of Gini shows that the gap of urban residents'income has been gradually narrowing. But the Gini of rural areas and the national is 0.4 or above. Comparing the relevant standard of the United Nations, the gap of people's income is relatively large. Theil index data shows that the gap of income among provinces has been gradually declining, and the gap of income among regions is the main reason for income gap. Another, this paper also points out the gap of income that exists among China's industries through the relevant data.There is a close connection between income distribution and economic growth. Not only economic growth can affect the gap of income distribution, but also income distribution can promote or restrain economic growth. The reasonable and moderate gap of income distribution is the inevitable result of distribution according to work and essential factors, also is the inevitable result of the law of market competition and the survival of the fittest mechanism. This gap of income can mobilize the enthusiasm of workers, promote the accumulation of capital and optimize the allocation of resources, thereby stimulate and accelerate economic growth. It is conducive to economic growth. However, the large gap of income distribution can cause insufficient effective demand, restrain the accumulation of capital, block the optimization of economic structure and the negative impact on social stability, thus block economic growth sustainable.After the theoretical research, this paper researched the relationship between China's economic growth and income distribution practically based on the time-series data 1978-2006. First, It verified long-term equilibrium and short-term dynamics change between economic growth and income distribution by co-integration analysis. Then using Granger causality test, it indicated that economic growth promote the expansion of the gap of income distribution, the contrary didn't work. Finally, this paper carried on the impulse response analysis and variance decomposition Empirical tests, the results showed that the impact on income distribution by China's economic growth is greater than the impact on economic growth of income distribution. This group of tests shows that: There is a long-term equilibrium between China's economic growth and income distribution, but the energy of the stimulating effect on economic growth by gap of income distribution has not yet been fully released. The state should start from the point of economic development, take positive effective policies to improve income distribution in China.In further empirical study, this paper used the method of PLS two times to analyze the factors can affect China's economic growth and income distribution, and found that the majority of the factors can promote economic growth, also can expand the gap of income. However, after empirical analysis, it found that two factors which can promote economic growth and improve income distribution: urbanization rate and the level of education. They are the "win-win" factors have effect on economic growth and income distribution.The paper analyzes the relationship between China's economic growth and income distribution from the qualitative and quantitative point in depth formerly. The result of research shows that economic growth and income distribution are closely linked. In order to achieve the sustainable comprehensive development of social and economy, we can not only pay attention to promote economic growth or only focus on narrowing the gap of income distribution. It's a long-term and arduous task to realize the harmonious development of income distribution and economic growth.