Government Subsidy,Innovation Incentives And Income Inequality

The widening income gap of our country in recent years has become the focus of academia,government and society.According to the official figures released by the national bureau of statistics for the first time in 2012,China's gini coefficient was rising since 2003 and up to 0.491 in 2008.Since then gini coefficient became gradually down.In addition,the households' financial research which was held by Southwest University of Finance and Economics even shows that Chinese family's gini coefficient is 0.61,far above the international warning line of 0.4.Existing research has focused on the city and countryside dual structure,the household registration system,the tendency of urban policy,monopoly,institutional change and the change of industrial structure,the pattern of economic development.To a certain extent,it is true that these studies reveal the reasons why income gap widening and propose the corresponding solution.However,they ignore the effect of technological progress.Because the widely use of new technologies is not achieved overnight,only some people will be able to enjoy the benefits of technology innovation during a certain time period?This is why technology innovation can lead to income inequality.In fact,the income inequality was rising as the level of innovation continued ascending.Science and technology policy which promote innovation level may also exacerbate inequality.Based on this,we try to study on technology innovation and government subsidies as the breakthrough point to investigate the reason why income gap widening and figure out the effect of the two factors on the income gap.Widening income gap will lead to class solidification,poor social mobility and will affect social stability.And it also has indirect effects on policy making such as disinflation,tax and other economic policy,therefore it is necessary to investigate the cause of the widening income gap.On the basis of reviewing the related literature,this paper extends the model of Aghion(2015)and put forward a model which is helpful to research the theory of hypothesis.From the empirical side,we use data of 24 provincial panel data between 2000 and 2010 and micro CHNS data to test the influence of innovation level,government subsidies on income gap,and get these following conclusions:(1)the innovation level,government subsidies have positive causal relationship with the income gap;(2)the government subsidies have a negative adjustment effect on the relationship on innovation level and the income gap.Even though this paper does robust test respectively from endogeneity,variable selection and heteroscedasticity,the conclusions are still significant and robust.