| The flows of international capital in the world today have been increasingly active among countries, of which more than50%capital exists as foreign direct investment of the world. Since the reform and opening up, the foreign direct investment of Jiangsu has increased quickly while the economy has achieved rapid development. However, the imbalance of regional economic growth has appeared gradually. The trend of high south and low north is obvious and the inequality in urban-rural income distribution is more and more serious. The income gap of urban and rural areas has become an important obstacle restricting the economic development and affect social stability. So, exploring the dynamics relationship between FDI and urban-rural income inequality and putting forward the corresponding policy recommendations is particularly necessary.This article analyzed the relationship of FDI and income inequality from three aspects. The first aspect, on the summary of theory and research, the author constructed analysis framework of the foreign direct investment and urban-rural income distribution inequality from the direct-indirect two different views. Second aspects, the writer tried to individually analyze the current development condition and characteristic with the specific economic data of FDI and urban-rural income gap. Besides, this study has conducted the quantitative research through Co-integration Test and Error Correction Model and Granger Causality Test about the dynamic relationship of the two variables. Third aspects, using the overall and13cities economic data of Jiangsu from1990to2010, the article has researched on the direct and indirect effects of FDI to Jiangsu’s urban-rural income inequality by sys-GMM method empirically through STATA11.0software. The panel-data model gave an analysis of how the FDI in Jiangsu and Southern Jiangsu, Middle Jiangsu, Northern Jiangsu affected their income distribution inequality through intermediate variable:industrial structure, employment structure and foreign trade. The results have been concluded in four aspects. First, the development condition of FDI in Jiangsu showed that the sole ownership is especially prominent, FDI mainly concentrated in the secondary industry and appeared the characteristic of "High south and Low north", most of which came from the Asian countries or areas. Second, the features of urban-rural income inequality of Jiangsu stated the income gap is becoming greater and greater in overall Jiangsu and three districts as though the resident income is increasing. Third, according to the result of co-integration test and ECM, the two variables have a long-term equilibrium relationship and FDI in Jiangsu had a positive effect on downsizing of income gap in the long term, vice versa in the short term. Besides, when the lag period is3, the two variables have bidirectional causality. Fourth, the sys-GMM regression model has proved that FDI in the overall Jiangsu and its three aspects has reduced the urban-rural income inequality. From the coefficient of the interaction term we can see that FDI can narrow the urban-rural income inequality by adjusting the employment structure, but expand the gap between urban and rural areas by promoting trade liberalization in the overall Jiangsu and all its three parts. FDI can also slow down the status of income distribution inequality by adjusting the industrial structure in South Jiangsu, but in other areas, the effects are opposite.According to the results, the article provided relevant advice on solving urban-rural income distribution inequality problem from the view of using foreign investment more reasonably and optimizing investment structure. |
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