The Income Gap Between City And Country Economic Growth: A Theoretical And Empirical Study

The relationship between economic growth and income gap is a inevitable problem in the economic development of all countries.If only the pursuit of the number and speed of economic growth ignoring the income gap widening,it will eventually intensified social conflicts and affect the economic growth and social harmony.In recent years,China’s economic growth has made great achievements,but at the same time the urban and rural income gap is wideninng.This paper firstly describes the development status of the urban-rural income gap and the economic growth in China analysing the change of the relationship between them since the reform and opening up.System reform has brought the rapid economic growth and improved the living standard of all residents,laying a firm foundation for narrowing the urban-rural income gap.But due to the dual economic structure,tilting development strategy,market reform and opening to the outside world.the urban-rural income gap did not be improved in the process of rapid economic growth.It means the deterioration effect brought by the economic growth is stronger than the improvement effect.On the other hand,the urban-rural income gap also impacts on economic growth by the production factors allocation.the consumption demand.the material capital accumulation and the human capital accumulation.Later we use1978-2012time series data to make empirical research.First,we test on the relationship between urban-rural income gap and economic growth whether meets the Kuznets inverted U hypothesis.Secondly,we establish VAR model of them and analyse the interaction between them through the cointegration test,granger causality test and impulse response function.On the whole,the deterioration effect of the urban-rural income gap brought by the economic growth is stronger than the improvement effect.And the urban-rural income gap promotes economic growth in the short term,but the constant enlargement of that will restrict economic growth in the long run.Finally.the paper puts forward relevant policy suggestions from the perspective of improving the urban-rural income gap.