Research On Impact Of Social Security Expenditure On Urban-Rural Income Gap Under Fiscal Decentralization

Since reform and opening-up, Chinese economy has achieved rapid development, the level of national income has improved constantly, urban-rural income gap also expanded. The expansion of Chinese urban-rural income gap has had a serious impact on the long-term development of China's economy, social stability and harmony. Scholars conducted much research on urban-rural income gap, including reason, module, effects and so on. Based on the social security expenditure and fiscal decentralization, this paper explores the reasons for the widening income gap between urban and rural areas in China.Because of city-countryside dualization, security expenditure as a powerful lever to adjust the income gap, it did not play a role to ease urban-rural income gap. At the same time, the fiscal power and administrative authority of local governments are unbalanced generated by fiscal decentralization also expanded urban-rural income gap. Based on this background, this paper reviews the literature related to urban-rural income gap, combed the mechanism and theoretical basis of fiscal decentralization, security expenditure on urban-rural income gap. Then considers that because of the characteristic of the fiscal decentralization, social security expenditure, they are likely to increase urban-rural income gap, and fiscal decentralization has a greater impact on social security spending.Then the paper describes the process of fiscal decentralization reform, the situation of social security expenditure and urban-rural income gap. And it analyzes the trend of urban-rural income gap as well as the effect of it on economic development and social stability.Based on analysis above, the paper uses panel date from 1998 to 2013, the method of Generalized Method of Moments and Threshold Mold to analyze the effect ion of social security expenditure, fiscal decentralization on the urban-rural income gap. The study shows that, due to the particularity of Chinese dual structure in urban and rural economy, there are positive correlation between the social security expenditure, fiscal decentralization with urban-rural income gap. But, there is double threshold effects that security expenditure has on the urban-rural income gap, based on the fiscal decentralization. When fiscal decentralization at low level, social security expenditure aggravate the urban-rural income gap, when fiscal decentralization above a certain level, social security expenditure aggravate can narrow the urban-rural income gap. Finally, based on the results of empirical analysis, the paper put some policy suggestions for narrowing the urban-rural income gap and building a harmonious sustainable development of the society, In order to realize the adjustment of social security expenditure to income distribution adjustment and that the Chinese fiscal decentralization can play the maximum benefit.