Research On Urban Bias Finance Policy And Urban-rural Income Gap

"Urban bias" is the development pattern of most countries’ strategic choices toachieve rapid economic growth in their early stages of economic accumulation，especially in the urban bias on the fiscal and taxation policies. But the endogenousdisadvantages of such economic growth model are the unfair distribution. Distributionpattern between urban and rural will gradually deteriorate， which is just anoutstanding problem facing China’s economic development at present stage. It is animportant guarantee for the steady development of economy and society to properlyhandle the urban and rural income distribution problems，accurately assess the effectsof "Urban bias" policy’s and complete the adjustment and optimization of theeconomic growth mode. The existing theories and empirical research results arerelatively abundant and laid a good foundation for this article.This article is divided into five parts. The first is an introduction to explain theresearch status in this field at home and abroad，the problem to solve in this paper andthe theoretical significance and practical value to our country’s economicdevelopment. The second part is a theory analysis of this article. This article mainlydraws lessons from the theory of path dependence，middle-income trap theory，andurban development theory，the local government economic theory and latest researchresults in aspects of poverty trap theory and extracts the related economic ideas tostrengthen the frontier study in this paper and theoretical depth. Urban bias of fiscalpolicy that is self-reinforcing and constantly absorbing supporting policies will formthe action of "path dependence" and "lock in" itself. Getting rid of such a suboptimalstrategy depends on the external institutional innovation，while urbanization alonecannot automatically narrow the income gap between urban and rural areas. Seeingfrom the perspective of city development theory，linkage development mode betweenurbanization and service industry in our country has not been formed and ignoring the development of rural areas may lead to “middle-income trap". In addition，the localgovernment should be an effective servant in the public finance system according tothe different needs of urban and rural areas to provide corresponding financial support.Overcoming the "poverty trap" in rural areas and realizing agricultural modernizationrequires sufficient funds for more than a certain "threshold value". The third partchose three variables which are dual finance contrast，income gap between urban andrural and rural residents’ consumption to discuss the internal linkage mechanismbetween urban biased policies and urban-rural income gap and its impact on ruralresidents’ consumption via Johansen co-integration theory and VECM model. Theresults show that the urban bias of fiscal policy is mainly affected by self-reinforcingand inertia，which proves that the existence of "path dependence" and the enlargementof income gap between urban and rural areas is not directly derived from fiscal bias.Predicting results also show that even if the city towards fiscal policy will be clearedup，the resistances of narrowing the income gap between urban and rural areas remainexistent. The fourth part uses the hybrid model method， takes agricultural economicgrowth as the goal and input the variable of local government fiscal agriculture toempirically analysis the contribution of each agricultural production factors. Theresults show that the labor input is still the main driver of agriculture economicgrowth at present. The investment of capital is mainly an indirect promotion ofagricultural development in the form of technological progress. However， thecontribution rate of technological progress to agricultural economic growth is not high.Thus local governments should focus on increasing rural science and technology andfinancial investment in human capital. The fifth part summarizes the full text researchconclusion and research results，which provide beneficial enlightenment for thefollowing adjustment of national policy.