Empirical Study Of Fiscal Decentralization,Urbanization And Urban-rural Income Gap

This article focuses on the relationship between China’s current system of fiscal decentralization and urbanization and the urban-rural income gap. This paper analyzes the theory that China’s top-down bureaucratic governance, local officials in pursuit of political promotion, will try to raise the GDP growth rate in the region. When the powers of local government expenditure increase, which means local officials have more control over financial resources, in pursuit of GDP, local officials will put more money into the city, to improve the level of urban infrastructure, improve capital marginal rate of return to attract more high-ability of labor and capital flows, improve the level of regional GDP growth. Structure of local government spending will favor the city’s, Will have a major impact on urbanization and urban-rural income gap. On the one hand, due to the large number of government investment in infrastructure in the urban sector, the marginal product of labor led to the improvement of the urban sector, wages in the urban sector workers also increased accordingly, which will lead to the expansion of urban-rural income gap; On the other hand, precisely because of local government expenditure urban bias, improving the city’s infrastructure, expanding the size of the city, attracting more high-ability of labor and capital flows, providing more employment opportunities for the foreign population, thus contributing to the development of urbanization. According to this logic, we can obtain the following two propositions:1. Fiscal decentralization will lead to the expansion of the income gap between urban and rural areas;2. Fiscal decentralization can promote urbanization. In the empirical study of the article, I uses the sample1994-201331provinces and autonomous regions in China build a panel data set to verify the above two propositions. The result is clear, fiscal decentralization promotes urbanization, but also to expand the urban-rural income gap. In addition, we also adopted the results of theoretical analysis and empirical research drawn to China’s financial reform some suggestions. In this paper, the development of the financial system for the future government, urbanization and income distribution policy strategy provides valuable research.