Research On The Effect Of China's Urban-Rural Income Gap On Economic Growth

Since the reform and opening up,China's national economy has been growing steadily,with per-capita GDP rising every year.At the same time,the income gap between urban and rural areas is also expanding,and between 1978 and 2015,the absolute difference increased 99 times.Since 2000,the urban and rural income ratio has been above 2.70,close to three,the urban and rural income disparity is grim.At this stage,China's economic development has entered a new normal,the problems of various contradictions are prominent,and the seriousness of the income gap between urban and rural areas is one.At the same time,under the new normal,the driving force of economic growth needs to be converted.In the past,the economic growth model which was too dependent on factor input and investment has been difficult to sustain,and the continued growth of the economy needs other ways.Future economic growth needs to rely more on innovation-driven,needs to rely more on the accumulation of human capital to promote,needs to rely more on consumer spending.That is,in order to promote future economic growth,more attention should be paid to the improvement of the quality of workers brought about by the promotion and accumulation of human capital,and more attention should be paid to the upgrading of domestic consumer demand.In 2015,China's rural areas has a population of 600 million,compared with the United States population of 320 million and the Japanese population of 120 million over the same period.Only China's rural population is nearly 2 times the population of the United States,5 times the population of Japan.It can be said that China's rural areas have abundant labor resources and huge consumer demand potential.Improving the quality of rural labor force and releasing the potential of rural consumption demand is in line with the transformation of China's future economic growth power.Therefore,it is necessary to pay enough attention to the potential negative effects of Urban-Rural income gap on economic growth.This paper takes the effect of China's Urban-Rural income gap on economic growth as the research object.The research method is theoretical analysis and empirical analysis.The purpose of the study is to recognize the importance of improving the urban-rural income gap to China's future economic growth.The main conclusions are as follows:1.Through the analysis of the mechanism of the effect of urban-rural income gap on economic growth,we know that the unreasonable expansion of urban-rural income gap will have serious negative effects on economic growth through consumption demand,human capital accumulation and social stability,resulting in weakening consumer demand and human capital accumulation,and even leading to a vicious cycle which results in stagnation of social mobility and lowers social vitality,while this will have serious negative effects on economic growth and social development.2.According to the VAR model of urban-rural income gap and economic growth,the conclusion is that the expansion of income gap between urban and rural areas caused by shocks leads to economic growth through systematic transmission.After analyzing the reasons behind it,we know that it is the accumulation and concentration of the elements of resources represented by the expansion of the income gap between urban and rural areas that contributed to the industrialization of the primitive accumulation and economic growth,which is largely attributed to physical capital accumulation.But at this stage we can no longer drive economic growth through the expansion of Urban-Rural income gap,because it is the logic of “draining the pond to get all the fish”.3.Through the empirical analysis of the effect of China's Urban-Rural income gap on economic growth,we can see that:(1)Through the ECM model of urban-rural income gap and resident's consumption demand,in the short term,per capita consumption expenditure of all residents will be reduced by 0.12 percentage points when urban-rural income gap(urban-rural income ratio)increases by 1 percentage point;in the long term,per capita consumption expenditure of all residents will be reduced by 0.15 percentage points when urban-rural income gap(urban-rural income ratio)increases by 1 percentage point.So the widening income gap between urban and rural areas has had a restraining effect on the consumer demand.(2)Through the ECM model of the final consumption expenditure and economic growth,in the short term,GDP will increase by 0.62 percentage points when final consumption increases by 1 percentage point;in the long term,GDP will increase by 0.77 percentage points when final consumption increases by 1 percentage point.So increasing consumer demand will play an important role in future economic growth.But since the reform and opening up,the contribution of consumer demand to economic growth is on the decline,at the same time,from the international comparison,China's consumer demand also has a large growth space,so how to stimulate domestic consumption demand is an important issue for future economic growth.(3)The future potential of the consumption of rural residents is huge.In 2015,the rural population was 78% of the urban population,but the consumption of rural residents was only 28.6% of the consumption of urban residents;the contribution of consumption of urban residents,which also accounts for 1 percent of the total population,is 2.8 times the contribution of consumption of rural residents to the total consumption of residents.From the above conclusions,we can see that the severe urban-rural income gap has had a negative effect on the economic growth through the consumption demand channel.At the same time,based on the great potential of the consumption of rural residents,the focus of stimulating domestic consumption demand in the future should be the release of rural residents' consumption potential,which needs to be based on the increase of rural residents' income.Therefore,combined with the transformation of future economic growth momentum,as well as the urban-rural income gap is still grim,and based on the qualitative and quantitative analysis of this article,from the perspective of promoting sustained and healthy economic growth,efforts should be made to improve the income gap between urban and rural areas.In order to improve the urban-rural income gap,two suggestions are put forward: First,it is necessary to get rid of institutional barriers to transfer rural surplus labor force and improve agricultural labor productivity.Second,it is necessary to promote the equalization of basic public services in urban and rural areas and make the distribution of public resources in urban and rural areas more balanced.