Research On The Income Distribution In The Progress Of Economic Growth

It is a very important research realm in economics that how will the economic growth and the income distribution interact each other. In the meantime, it is also an actual problem which every country has to face. Especially in the developing countries, how to choose the policies about economic growth and income distribution is a major problem which should be studied and solved in the progress of economic growth.If the economic growth can be simply discribed as production increase, in market economy the production increase will be primary distributed through market. On the base of primary distribution, the government redistributed the production increase for its specific economic, political, and social goals. The final distribution pattern will come into being after the primary distribution and the redistribution. In the economic growth process, the primary distribution is relevant to the market conditions and the technology progresses: The reason of income gap in the perfect market is the difference of quantity and quality of the production factors provided by the individuals. The reason of income gap in the imperfect market is the difference of position in the market, including the difference between monopoly industries'staff and other industries'staff, the difference between urban residents and rural residents, and the difference between developed areas'residents and underdeveloped areas'residents. in addition, the reason of income gap under technology progresses conditions is the difference of factor proportion or technology owned. The redistribution is one of the government's functions. The government should use discretionary and automatic policy instruments based on the clear knowing the different reasons of income gap. The discretionary policies are those which the government uses actively to fit the different situations based on the income distribution patterns in different periods. The automatic policies are those which the government uses passively according to some regular rules of state revenues and expenditures. According to the data, the effects of these two policies used by the Chinese government did not obviously narrow the income gap. The positive analysis of economic growth and income distribution shows that economic growth will not inevitably narrow the income gap. The income distribution function is a function of several variables in which the structured variables are very important. The level of marketization, socio-economical structure, and the development strategy of income distribution will influence the income gap.The aggregate supply and the aggregate demand have a great impact on economic growth. The potential capability of long-term economic growth is determined by the aggregate supply. The short-term economic growth is determined by the aggregate demand provided full use of the present resources. The income distribution will influence the economic growth through the aggregate supply and the aggregate demand. The income distribution will influence the aggregate supply through the capital formation, labor formation and the efficiency of resource allocation. Income distribution deterioration within certain extent will not hinder capital formation. But after exceeding certain limit Income distribution deterioration will have an adverse impact on capital formation. More Unequal income distribution will be less beneficial to the formation of labor. At the same time, if education costs are so high that it may lead to the intergenerational transmission of the income distribution. Both the process and the outcome of income distribution may influence the efficiency of resource allocation. The income distribution will influence the aggregate demand through the consumption demand and investment demand. Unequal distribution of income will lead to the decrease in average propensity to consume which will decrease the consumption demand; Unequal distribution of income will also make the transformation from saving to investment more hard which will decrease the investment demand. The positive analysis of income distribution and aggregate demand proved the conclusion that unequal distribution of income will lead to decrease in aggregate demand.The research before is on the premise of closed economy, but in reality the complete closed economy is not exist. In order to fully reveal the relationship between the economic growth and income distrbution, it is necessary to put them into open economy. In the open economy the interaction between economic growth and income distrbution is realized through transnational flows of goods and elements. The international trade and FDI are the major ways to the interaction. The impact to income distribution of economic growth is realized through international trade. While international trade will improve China's current income distribution through the different elements'prices, and on the other hand they will deteriorate China's current income distribution through the incomplete market.The impact to economic growth of income distribution is realized through FDI and international trade. There is not obvious negative impact to FDI and international trade of China's current income distribution. But with the economic development, if there is no improvement of income distribution, worsening income distribution will hinder FDI and international trade to grow further. The positive analysis of economic growth and income distribution proved the conclusions above.The balance of fairness and efficiency must be considered in government economic policy issues,so to the income distribution policy issues. The result of previous income distribution is the starting of the next income distribution phase, so the the balance of fairness and efficiency can be reaserched from the process and result of income distribution. The income distribution policy issues to improve the economic growth should include both the marketization of distribution process and the efforts to make the distribution result fairer. The marketization of distribution process policy issues Include two areas which are product markets and factor markets. The policy issues to make the product markets more competitive include the introduction of competition in the market, the implementation of the separation of government from enterprises, the implementation of government control and the implementation of equity diversity. The policy issues to make the factor markets more competitive include Reform of the household registration system, improvement of public services and reasonable use of resources. The policy issues to make the distribution result more fair Include two areas which are fiscal revenues and fiscal expenditures. the policy issues about fiscal revenues Include income tax policies, social insurance tax policies, general property taxes policies and property transfer tax policies. The policy issues about fiscal expenditures Include Inter-regional transfer payment policies, social security expenditure policies and education expenditure policies.