D Ynamic Association Analysis Of Income Gap And Social Harmony In China

China is a developing socialist country; the social contradictions have been aggravated by the widening wealth gap problem at the present stage when facing with the objection of constructing a well-off society. Addressing the distribution pattern of residents’ income, resolving the contradictions of the widening gap between the rich and the poor and coordinating the interests of the various strata of society are playing a very important role in the historical task of building a harmonious society. The focus of this study lies in analyze the dynamic relationship between the wealth gap and social harmony degree in the past thirty years accounting for statistical methods. The paper have established two main lines based on constructing two index systems for the wealth gap and social harmonious degree for each, and build a dynamic model.The main thesis can be divided into two parts, the first part including the introduction of background and theoretical explanations. Another part is empirical analysis, to get the index value by building a multivariate statistical regression model though the establishment of index system based on the data from1980to2010. By constructing an error correction model, the paper analyzes the dynamic relationship between the wealth gap and social harmonious degree, and proposes a relevant policy advice. The main structure of this paper is as follows.The first chapter is the introduction, which introduces the background, main contents and methods, purpose and significance of the study.The second chapter is the introduction of the relevant economic theory, including the principal component analysis, cointegration, causality test and error correction model theory, while recalling other articles which also analyze the relationship between the wealth gap and social harmonious from home and abroad.Chapter three constructs comprehensive evaluation index systems which reflect the wealth gap and social harmony. This chapter builds a national mixed Gini coefficient to reflect the current gap between rich and poor. The paper reflects that the social harmony is constructed of17sub-indicators from the four aspects of the economy, politics, civilization, and ecological. The paper computes the total index value using a linear weighting model.Chapter four uses the graphical analysis, cointegration analysis and causal analysis methods to explore the long-term relationship between the wealth gap and social harmony. The result shows that the gap between rich and poor is the direct cause of social harmony, the changes in the gap between the rich and the poor and social harmony is the long-run equilibrium. The article also establishes the error correction model to investigate the short-term association of the gap between the rich and the poor and social harmony. The results show that Jini coefficients is a significant factor that affect social harmony which minor changes will lead to a larger change of the social harmony. Government need to take timely measures to curb the continuing expanding of the wealth gap, and improve the tax system to promote the harmonious development of society.Chapter five is conclusion and recommendation. It summarizes the main research work and put forward appropriate policy recommendations. Also it points out this article shortcomings as well as the subject of future research directions.