The Research On The Mechanism Of Government Investment's Influence On Urban-rural Income Disparity

In China, since the reform and opening policy to outside, the urban-rural income inequality has been growing. This is a big treat to the stability of our society and the continuing development of economics. As a hot topic, the urban-rural income inequality has attracted the government and academia's attention. The scholars home and abroad conducted massive research from the different angles to study the reasons of income disparity and search the countermeasure to reduce it.This article uses the method that the fundamental research combines with the empirical study, from the rural human capital overflow's angle to explain urban-rural income differential. It explains the urban-rural development disparity's evolutionary path and the reasons of formation through theoretical models. Finally it highlights that the government intervention is an effective and important way to reduce urban-rural development disparity.This article is divided into five parts:the introduction, the related literature reviews, the fundamental research, the empirical study and the policy advisements.The introduction part (the first chapter), draws out the article's research question, defines some related concepts and gives a brief introduction of the innovation as well as the existence insufficiency of this article.The related literature reviews part (the second chapter), makes a brief summary to the related literature from three aspects:the indexes of urban-rural income disparity, the disparity origin, the countermeasures to reduce income gap. In addition, it introduces professor Hou's human capital overflow of two regions and Becker's household income inequality and generation variability theory in detail, which are the theoretical foundation of this paper.The theory part (the third, fourth, fifth chapter):in the third chapter, it highlights the important role of human capital in economic development and statically analyzes the decision-making mechanism of rural human capital "spillover" to the city and its impact on the rural-urban income through urban and rural output function constructing by input elements of human capital; in the fourth and fifth chapters, enlightening by the paper "inequality and the variability between the generations," in " A Treatise on The Family "written by the Nobel Economics Prize winner Gary Becker. Stanley in 1992, it attempts to construct a function of the urban-rural inequality income dynamic evolution model based on the establishment of an urban-rural income function, to analyze the effects of the levels of government investment, physical capital investment and human capital stock, as well as a number of social parameters on urban-rural income levels, to examine the dynamic evolution of urban-rural income gap, and further to state the effect of the government's behavior in China's urban and rural economic development that only relys on the market's rational choice inevitably leads to the development gap between urban and rural areas continuing to expand in a vicious cycle; however, if supplemented by a benign adjustment by the government, the gap between urban and rural areas will tend to be smaller.The empirical study part (the sixth chapter), through the empirical data, proves that the capital spending disparity and the human capital investment disparity cause the urban-rural income differential enlargement, but the government can reduce this trend effectively if it increases investment to the rural areas.The policy suggestion part (the seventh chapter), in the preamble fundamental of theoretical research and empirical study, proposes that the government can increase investment to rural areas in the following aspects:the education, the science and technology, the infrastructure, the rural finance and the social security.