Empirical Research On The Impact Of Fdi On The Urban-rural Income Gap

The issue of urban and rural income distribution has always been focused on by specialist, politician and community in our country. Although Jiangsu province is not one of the districts which have the most serious urban and rural income gap, but its changing structure has a trend of enlarging the urban and rural income gap. If we don't handle this benefit distribution issue properly, it may cause potential social unrest when urban and rural income gap approach certain cordon, so we shouldn't ignore the urban and rural income distribution issues in Jiangsu province. As we know, since China's opening and reforming, FDI plays an important effect on the development of Chinese economy, and it is a hot spot in international investors'eyes, also it is the important district which attracts foreign investment. By the end of 2010, the number of making use of foreign direct investment in Jiangsu province is 2212.18 billion dollars, and it accounts for 20.4 percent of the country's total cumulative absorption of FDI. Large scale of introduction of foreign capital brings capital, technology, management and so on. Through attracting all kinds of advantageous resources, it affects the employment and income level of different workers which has an effect on the urban and rural income distribution.This article which counts Jiangsu province as an analysis object, does an research about the effect of FDI on urban and rural income gap with theoretical discussion and empirical analysis. The author thinks FDI affects the urban and rural income through adjusting the structure of industry, overflowing technology, foreign trade and the price of land. We test whether the introduction of FDI enlarges the urban and rural income gap or not, through establishing time series models and panel data model, and make a conclusion about that:the introduction of FDI deteriorates the urban and rural income distribution in Jiangsu province, in the passing decade, the introduction of FDI in southern part of Jiangsu province increases the urban and rural income gap, on the contrary, in the northern part and middle of Jiangsu province, the introduction of FDI reduces the urban and rural income gap in this area. Finally, on the basis of empirical analysis, the author proposes political suggestions about how to make use of foreign investment to improve the urban and rural income distribution.