Research On Dynamic Relationship Between Urban-rural Income Gap And Rural Public Goods Supply

As China gradually enters the rank of middle-income countries, domestic residents’ incomegap is rapidly widening. As an integral part of overall income gap, the broadening Urban-ruralIncome Gap has become a problem we have to pay increasing attention to. Especially inGuangdong Province, excessive widening of Urban-rural Income Gap will not only reduceresidents’ marginal consumption tendency, restrict the increase of domestic demand and slowthe pace of eradicating poverty, but also inhibit the development of agriculture, result inirrational industrial structure and affect the long-term healthy development of entire nationaleconomy, furthermore affect social and political stability. Broadening Urban-rural IncomeGap is becoming the constraint of Guangdong Province’s development. It is highly urgent totake reasonable and effective measures to narrow it and keep it at an appropriate level.Firstly, this paper calculates Urban-rural Income Ratio and Gini Coefficient to describe TimeSeries Variation Feature of Urban-rural Income Gap from1978to2010, and then decomposesGini Coefficient to further examine its Source Structural Feature. The results show that:Urban-rural Income Gap of Guangdong Province has experienced five stages, that is "rapiddeclineâ†'rapid increaseâ†'short-term declineâ†'fast ascentâ†'slight increase", showing afluctuating widening tendency on the whole, among all, wage income and transfer incomecontribute most to the entire Urban-rural Income Gap. Secondly, this paper calculates thedistance between urban and rural area in public finance expenditure, basic education andpublic health service. Estimation shows that there is vast gap in public goods supply betweenurban and rural area. Finally, this paper establishes an Urban-Rural Income Gap Model, usesImpulse Response Function and Variance Decomposition based on VAR Model to identifyhow the disturbance of various factors act on Urban-rural Income Gap through economicsystem. The empirical research shows that: insufficiency of Rural Public Goods Supply is themost important exogenous factors. It produces artificially imposed exogenous Urban-ruralIncome Gap that is irreversible and cumulatively-expanding, not only through affecting theallocation of economic resources, but also by influencing redistribution. The key to narrowUrban-rural Income Gap is to increase Rural Public Goods Supply. Therefore, increasingfiscal and financial support to rural areas is of strategic importance for raising peasants’income, narrowing Urban-rural Income Gap and promoting sustainable development.