The Analysis On The Impact Of Income Gap On Economic Growth

In recent years,China's official Gini coefficient has slightly decreased,but it is still at a high level,far exceeding the international warning line of 0.4,which shows that the current income gap in China is huge,and the phenomenon of unfair income distribution is serious.In many studies,it is acknowledged that the increase in the income gap will lead to an economy falling into the “middle income trap”,coupled with the current slowdown in China's economic growth,sluggish domestic consumption,and a large influx of funds to real estate.The discussion about whether China will fall into the “middle income trap” is endless.Based on China's current middle income stage,this paper discusses the current situation of China's income gap under recognizing the phenomenon of “middle income trap”,and further studies how the current income gap is related to growth: Firstly,the internal logic between the two variables is clarified theoretically.Secondly,this paper selects the data of income gap,economic growth and other provincial panel data that affect economic growth from 2001 to2016,and uses empirical methods to conduct quantitative research.This paper analyzes whether the two variables are connected directly or indirectly,establishes a static and dynamic panel model and studies the relationship between the two variables of the country and different regions through nonlinear estimation methods.The results show that the income gap has a indirect effect on economic growth,which needs a intermediate variable.At the national level,the income gap is a kind of first promotion and post-inhibition.That is,the relationship is “U” type.Besides the current national income gap is huge,which has already had a restraining effect on economic growth.The relationship between economic growth and the income gap in the eastern,central and western regions is like a “U” shape.The relationship is only different in the threshold of the income gap.That is to say,three regions has different tolerance for income gap which increases from east to west.Income gap of the eastern and middle region has a positive effect,and the western region is just the opposite.Based on the results of this study,the paper also gives corresponding recommendation.The government needs to strengthen vigilance to prevent falling into the “middle income trap”,improves the economic system,narrows the income gap of the whole people,increases farmers' income,narrows the income gap between urban and rural areas,develops“One-handedly grasping”,narrows the regional income gap,improves social stability and creates favorable conditions for economic development.