The Empirical Research On The Effect Of Expenditure Of Social Security On The Income Gap Of Residents

China’s income gap between the residents in urban and rural areas has been the focus around the country. Scholars conducted much research on the reasons of the income gap between urban and rural areas and policies to close the gap. Social security is regarded as a powerful level of regulating the income gap. However, the social security as an important part of transfer payment has not play a good role in regulating the income gap is an important influential factor. Based on the background, this paper discussed the relationship between social security expenditure and the income gap between urban and rural areas from the perspective of social security, in order to take some effective measures to narrow the income gap between urban and rural areas and improve the income distribution state through analyze the social security expenditure.Based on reading and combed a large number of domestic and foreign literature about social security expenditure and the income gap between urban and rural areas, I found that on the part of the social security expenditure and income gap, domestic scholars probably hold two representative views:Firstly, social security expenditure narrowed the income gap; secondly, social security expenditure expanded the income gap.In this paper, by using time series data,empirical analyze the relationship between social security expenditure and the income gap between urban and rural areas, and concluded that improve the total level of China’s social security expenditure will wide the income gap in the short term, and narrow the income gap in the long term. Finally, according to the empirical results, this paper puts forward some Suggestions to perfect our country’s social security policies.This paper is divided into six chapters:the first chapter is the introduction, it mainly introduced the research background, research significance, research angle, research purpose, research methods, the domestic and foreign literature reviews; Chapter Ⅱ is the theoretical basis. Defined the main concepts and analyzes the social security expenditure on the influence mechanism of residents’income gap; Chapter Ⅲ introduces the present situation of social security and expounds the22between1990-2011China’s social security expenditure、the classification of urban and rural social security expenditure and so on. In addition,analyzes the present situation and effect of the income gap between urban and rural areas. Chapter IV is the empirical analysis, it is the focus of this article. VAR model is established by using time series data. And by means of impulse response function and variance decomposition method to examine the relationship between social security expenditure and income gap in urban and rural areas. Chapter V is the empirical analysis of the social security expenditure per capita to the income. Chapter VI is empirical conclusions and policy recommendations, which is the end of the thesis. The empirical study concluded with the revelation, and the outlook of the future research.