The Research On The Effect Of The Difference Of Public Goods Supply On Income Gap Between Urban And Rural Area

Since the reforming and opening up, China’s economy has made tremendousprogress. In2001, China joined the WTO, in2008China held The Olympic Games, in2010, China’s GDP exceeded Japan and ranked the second in the world, which createda miracle. However, in a time of rapid economic development, China has the problemof large income gap between urban and rural areas. The income gap between urbanand rural in1978was209.8Yuan, from1978to2011, the income gap between urbanand rural areas has skyrocketed, in2011the income gap reached14832.51Yuan. Withthe expanding of income gap, the government began to attach great importance to thebalanced economic development between urban and rural and took a series ofmeasures to improve the income of farmers，such as abolishing agricultural tax, givingthe direct subsidies to farmers, but the effect is not significant, the income gapbetween urban and rural expanded largely.Firstly, the author establish a two-sector economy model to analyze therelationship between the difference of supply of public goods and the income gapbetween urban and rural area when the economy in the two sectors is in equilibrium.And on this basis, a detailed analysis of the transmission mechanism of the differenceof public goods such as education, healthcare, government budgetary investment andsocial security to income gap between urban and rural areas has made. Then theauthor analyze the situation of the relationship between public goods supplydifference and urban-rural income gap on the whole and regionally. Situation analysisshows that the changes of urban and rural public goods supply and income gap are inthe same direction.On the basis of theory and situation analysis, the author uses2006-2011paneldata of31provinces to make an empirical analysis on the influence of difference inthe supply of public goods and the income gap between urban and rural areas. Theempirical results show that the different supply of public goods such as education,health care, investment in fixed assets of the state budget, social se curity betweenurban and rural area have made a positive effect on urban-rural income gap, thegreater the difference of public goods supply is, the greater the income gap betweenurban and rural areas is. In the factors of public goods supply, education r esource gapsignificantly affected urban and rural income gap, and the influence of the gap in primary school education resource on urban-rural income gap is greater than theinfluence of the gap in middle school education resource on urban-rural income gap.Regional analysis shows that the gap of the state budget gap of fixed asset investmentand social security between urban and rural has a significant effect on the income gapof eastern and central regions, and the uneven distribution of education resour ces inurban and rural is one of the important factors on the urban-rural income gap in thewestern region. Finally, on the basis of theoretical and empirical analysis, the authorproposes effective measures to narrow the income gap between urban and rural areasfrom the point of view of system construction, capital oversight and urbanization.