The Impact Of Exo-Urbanization On Urban-Rural Income Gap

With the acceleration of urbanization, a large number of farmers migrate to city and increase their income. However, inequality becomes severe. Can urbanization narrow down urban-rural income gap? Literatures are based on the whole country, but motivations of urbanization significantly differ in the region. As to the Pearl River Delta, the main motivation of urbanization is foreign investment, which is considered to be exo-urbanization, compared with other regions'in China promoted by the government. Foreign investment drives economic development and urbanization, increases employment opportunities for farmers, and enriches their income. So such urbanization should help reduce poverty and narrow urban-rural income gap.In this paper, we focus on the Pearl River Delta and re-examine the relationship between urbanization and urban-rural income gap. Firstly, on the basis of literature review, we theoretically-analyze the characteristics of exo-urbanization and mechanism between urbanization and urban-rural income gap. Secondly, we handle Yearbook data, and analyze income distribution and urbanization. Then, in theory, we put forward hypothesis, modify Kuznets "inverted U" and establish the second curve. We adopt a comprehensive index system which comprises of urbanization\economic development GDP\foreign investment\export trade and government's finance to measure the level of urbanization, and makes an empirical study by using panel data from 1990 to 2009. It concludes that urbanization can reduce urban-rural income gap, foreign investment and export trade force the gap to widen, and economic development GDP has a "U-type" relationship with urban-rural income gap. It means that with development of economics, urban-rural income gap shrinks at first, when it reaches a minimum, then it continue to expand; while the government's finance has a positive relationship. It reflects that government's finance mainly benefits the urban and virtually opens the urban-rural income gap. Finally, we suggest some solutions.