Income Gap, Insufficient Effective Demand And Growth Slowdown

The growth slowdown occurred in the middle-income stage draw developing countries’attention greatly. Now China’s economic growth has dropped signiifcantly, with the biggerdomestic income distribution gap and insuiffcient consumer demand. It’s urgently needed toreshape the economic growth impetus. This article mainly launches the research from thefollowing aspects:First of all, on the basis of existing research, this paper simulated the development ofdeveloping countries, and constructed the theory model to explain the economic growthslowdown caused by insufifcient effective demand. The model explains (1) The unbalancedcapital cost is clearly tilt the economic environment which become the cause of the income gap.(2) Low-income groups concentrate in choosing low quality level products which induces theinsuiffcient effective demand and causes to the lower balance point of the economic growth.(3)The internal mechanism of economic growth in the view of the insuiffcient effective demandrestricting enetrprise innovation.(4) In the condition of open economy due to the technology gapand inequality division of labor, the innovation and the effective demand in developing countriesis insufifcient, which leads to the formation mechanism of the "middle-income trap".Secondly，this article selects representative middle-income countries and developedco’untries economic growth data to summarize the experience of these countries, and veriyfeffect that the income gap and residents consumption bring to the economic growth process. Theempirical facts show that slowdown will occur both in the middle-income and the high-incomestage. Residents’ ifnal consumption rate and gini coeiffcient in the middle-income trap nationimprove the development of agriculture and tertiary industry, and restrict the industrialization. Inthe respect of the inlfuential factors in determining the slowdown, it’s found that raising the ratioof consumption and more exports will release the probability of the economic growth ratedecline，but it can increase the likelihood of economic growth equilibrium in the developedcountries. For the middle-income countries, the results show that the gini coeiffcient only restrictthe increase of the GNI per capita growth rate, but they weakened the probability of theslowdown and the stagnation，however according to the result of the representative ifve countries the improvement of the industrialization level will increase the possibility ofslowdown.Again, this article has empirical test to the relationship of the residents’ consumption, theincome gap and economic growth in China. The results show that the income in China is low,and the income gap become wider. With the effect of income inequality, the upgrade rate ofresident’s consumption structure is slower than the rising ratio of consumption. Incomeinequality inlfuences the quality of industrialization and suppresses the promotion ofconsumption. The results of the empirical test also show that the large income gap will bringdown the rate of economic growth by weaken the effect of consumption, thus the increase ofresident’s consumption rate should be raised on the premise of narrowing of income gap.Finally, this paper points out the research revelation and the research prospect.