Economic Reform and Income Gap Between Urban and Rural Areas in China
Since economic reform beginning in 1978, China’s economy has grown rapidly resulting in higher standard of living for both urban and rural residents. However, the income gap between urban and rural residents continues to expand. Using time series data from 1978 to 2019 and cointegration technique, wefind that (i) in the long run China’s Dual Economic Structure,Dependence on Foreign Trade and Difference Between Urban and Rural Consumption Levels expand the income gap while theUrbanizationRateand Proportion of Agriculture in GDP reduce the income gap between urban and rural residents; and (ii)in the short run, only the Dual Economic Structureand Proportion of Agriculture in GDPhad a significant impact on the urban-rural income gap.Accordingly, we recommend the governments increase investments in agricultural technology and training programs, promote the export of agricultural products,and encouragethe rural residents to consume more by increasing agricultural subsidies.
Keywords - Income gap, time series analysis, cointegration, and China.