The Spatial Econometric Study On The Effects Of Urban-rural Income Disparity In China

Income distribution is one of the major subjects in international economic studies. International economic experience shows that growth is always related to income distribution. China has experienced high economic growth during the past thirty years after Economic Reforms and the urban-rural gap has increased at the same time. Therefore, the urban-rural income gap in China is very important research subject.Built on the literature on income distribution, this thesis studies the long-term trend of urban-rural income gap in Chinese economy, and compares the urban-rural gap across provinces. This thesis also qualitatively analyzes the effects of urban-rural human capital ratio,urban-rural labor ratio and agglomeration of the secondary and tertiary sectors on urban-rural gap. Based on the different production functions of urban and non-urban economies, this thesis develops a model that incorporates various urban-rural factor input ratios, agglomeration effects of the secondary and tertiary sectors, and spatial spillovers as explanatory variables and uses the fixed effects econometric method to test the theoretical predictions and estimates the effect of each explanatory variable. The conclusions of this thesis are following:First, in the period of economic reform, the urban-rural gap has fluctuated widely with a W-shaped trend. The urban-rural disparity shows regional variation, with the disparity progressively larger from the eastern region to the central and to the western region.Second, the fixed effects panel data model with spatially lagged dependent variables provides statistically more significant results than conventional pooled model. The empirical results indicate that urban-rural human capital ratio, urban-rural capital ratio, cost of input in agricultural sector, agglomeration of the secondary and tertiary sectors, and spatial lag variable all have positive effects on urban-rural disparity whereas the ratio of urban labor-to-rural labor has negative effect on urban-rural disparity. The findings are basically consistent with qualitative analysis and predictions by the theory. Built on the significant findings of the disquisition, this thesis raises some correlative and effective suggestions.