A Study On The Impact Of Urbanization On Income Gap Between Urban And Rural Residents

Since China followed the policy of reform and opening, our economy has grew rapidly, the level of industrialization and urbanization has increased significantly, and people’s living standards has improved significantly. But at the same time, in our country the urban-rural income gap has been showing a trend of rising.The process of urbanization is one of the important factors affecting the income gap between urban and rural residents. It is still be debate in the academic world whether urbanization could enlarge the urban-rural income gap or narrow the gap. In addition, there are significant regional differences in China’s urbanization and the urban-rural income gap. It has important significance to research the influence of urbanization impact on the urban-rural income gap in different areas.This paper studies the impact of China’s East area, middle area, and west area of the process of urbanization act on the urban-rural income gap based on theoretical analysis and panel data regression model. It aims to explore the difference of the impact that urbanization affects the urban-rural income gap among different areas which has different level of urbanization.Firstly, this paper analyzes the current situation of the development of China’s urbanization and the urban-rural income gap, results show that China’s urbanization level and the urban-rural income gap exist obvious regional differences. At present, China’s urbanization is in the acceleration stage and in 2012 reached the average level of the world, but compared to the developed countries still have a large gap. China’s eastern region urbanization rate was significantly higher than that in the middle region and western region. Since the reform and opening up, the income of Chinese residents has increased significantly, but the income gap between urban and rural residents is still showing a rising trend.Then this paper summarizes the way that urbanization acts on the urban-rural income gap, that is, the influence mechanism that urbanization affects the income gap between urban and rural residents. These paths separately from the industrial structure, local fiscal policy, financial development scale, foreign trade, income structure, the rural population structure and educational resource. These paths some will narrow the urban-rural income gap, while others will widen the urban-rural income gap.According to the above theory, this paper established three fixed effect panel data model based on East area, middle area, and west area. In this paper, the ratio of income of urban and rural residents indicates the urban-rural income gap;The empirical results show that the urbanization impact on the income gap between urban and rural residents in China has structural difference. The urbanization of the east area and middle area exacerbated the widening income gap between urban and rural residents from 2003 to 2013, while there is an opposite effect in west area, urbanization narrowing the urban-rural income gap. The main reason for this result is that there are three factors have great influence on the expansion of income gap between urban and rural residents in the east area and middle area, the rural population migrating to cities and towns, urban biased financial policy and the invisible income of urban residents. However in the west area, there are two ways that can significantly reduce the urban-rural income gap, the foreign trade and local fiscal expenditure.