Measurement Methods And Empirical Analysis Of Urban-Rural Income Gap In China

Income inequality attracts more eyes than ever, due to the fast growth of economy and citizens’ richness, of which the income gap of urban-rural is the most significant. Therefore, it’s urgent to dig into the true meaning of urban-rural gap ultimately to suppress its expanding. Currently, the ratio of the incomes of urban and rural is widely used to measure the gap, however it has flaws in its weakness in incarnation and ignoring the effect of population share. This paper researches on the gap from a new perspective after examining the flaws in the ratio of the incomes of urban and rural.For one thing, we define "the gap of urban-rural" as the difference between urban residents group and rural residents group, followed by the introduction of the method to measure the gap between groups. This method consists of subgroup representative comparison analysis, subgroup distribution function comparison analysis, subgroup population share based measure and intergroup relative deprivation based measure. Then the urban-rural group data from NBSC, say National Bureau of Statistics of China, is adopted to do our measure. Firstly, we introduce the evolvement of urban-rural income gap since the implementation of reformation and opening, which could be stated as "Obvious Drop-Fast Rise-Short Drop-Sustained Rise-Slight Drop " briefly. After that, by using the Gini coefficient based Social Welfare Function, the trend of income gap change is obtained, in which we find that the reduction of in-rural income gap contributes to the decline trend in 2007. Next, an improved logistic function is employed to fit the distribution of income perfectly and Economic Distance along with Distance Function is calculated, from which we find the growth of income disparity between urban and rural results from the increase of mixed urban-rural population and diversity in urban and rural themselves. Afterwards, Gini coefficient is used to analyze intergroup gap index with population share in consideration, it’s found that the effect of urban population growth on the urban-rural gap is not significant. In the end, it’s observed that rural outside inequality is the main reason behind the gap, after we resolve the urban-rural gap into rural outside inequality and urban outside inequality by using relative deprivation, both of them contributes more than 90%.This paper lists several added index to improve the deficiency in the ratio of the incomes of urban and rural. And yet there seems not to be a perfect index to measure urban-rural gap, so it’s needed to pick one up according to context in practice. Our research makes a great difference in eliminating the urban-rural gap and increasing farmers’ income, especially for the lower class.