The Poverty-Reduction Effect Of Rural Public Spending Under The Background Of Dual Economic Structure

Poverty has always been accompanying with the development of human society,which is the severe challenge we all faced. Of course, China is not an exception. Ourcountry’s rural poverty got a significant improvement because of the rapid economydevelopment since Reformation and Opening. The rural poverty incidence has been from30.7%in1978to2.4in2006and the absolutely poverty-stricken population has also beenreduced by200million, we have been the first one who meets the millenniumdevelopment goals. But the poverty-reduction effect based on economic development hasbecome more and more weak. According to the poverty line published by our government,the rural poverty population dropped by approximately200million from1978-2004, butthe half was achieved during1978-1985. The progress of poverty-reduction appearsslowing obviously after1980s.The number of poverty-reduction is only half of the1978-1985in an average year. China’s real GDP per head grows as high as9.9%with anaverage annual, which is much higher than the level of reform and opening early, but thequantity of poverty-reduction is less than its1/3. All of those show that the traditionaltheories of “Trickle-down effect” and “Diffusion effect” which are rise by new welfareeconomists have been proved false. The revenue produced by economic developmentwon’t trickle down to every class and group automatically. Whether domestic or foreignliterature studies have shown that poverty reduction effect depends not only on economicgrowth in recent years, the income gap between urban and rural, the property distributionand agricultural labor productivity factors also relate with poverty-reduction effect closely.The root of those factors is the dual economic structure of urban and rural areas in China.In the early stage of industrialization, our government carried out a Forging AheadStrategy so as to realize industrialization early. And then, the government took acompletely different resources preferential policy between urban and rural areas, which made the resources allocation between urban and rural areas have serious imbalance. Atthe same time, the government also took a matching partial urban financial system, whichmeans most of financial supports are went into the urban areas.The serious deficiencies of public fiscal support cause the lack of infrastructure inrural areas in the long time.This paper based on the previous theories and empirical studies combines with ourcountry’s specific situation of dual economic structure of urban and rural areas. The papertakes the econometric method of FM-OLS to study the marginal effect of rural publicexpenditures in the background of the dual economic structure of urban and rural areas.And then, we can order each of rural public expenditures according to their level. Finally,we can give some suggestions to improve. The empirical results show that the four ruralexpenditures’ order runs as follows: three cost of agricultural science and technology(nong ye ke ji san xiang fei yong)>the expenditure supporting agriculture (zhi nong zhichu)> the basic agricultural construction spending (nong ye ji ben jian she zhi chu)> relieffund (nong cun jiu ji fei).