A Study On The Income Gap Between Urban And Rural Areas In Shandong Province Based On Human Capital Investment

The reform of the economic system makes the economy of our country get the fast development. The per capita income has been greatly improved, and the same to people’s living standard. But with the rapid economic growth, the negative effects for example Urban-Rural income gap are also gradually emerging. Urban-Rural income gap not only will bring consumption shortage situation, but also intensify social contradictions and even endanger the political stability. Urban-Rural income gap has become the focus of the government and people.Under this background, the paper based on the existing research, takes Shandong Province as the object of study, utilizes literature review method, comparative analysis and empirical analysis, systematicly studies the effect of human capital investment on Urban-Rural income gap. Firstly, the paper reviews the theory of human capital and the theory of Urban-Rural income gap. Secondly, the paper analyzes the status quo of Urban-Rural income gap of Shandong province and the human capital investment gap of Shandong Province. In the analysis process, the paper carries on the analysis to Urban-Rural income gap by stages during the time samples, and from the external factors influencing Urban-Rural income gap to explain. The paper mainly through the chart method analyzes the urban and rural human capital investment gap, and also explains the causes of it Finally, from an empirical point of view, the paper analyzes the impact of human capital investment to the gap of urban-rural income in Shandong Province. Econometric analysis ignores the effect of the learning by doing. The paper uses education investment, health investment and transfer investment to measure human capital investment. By establishing econometric model, using1990-2011data, the paper quantitative analysis of the influence of human capital investment on Urban-Rural income gap.The research shows that:the coefficient of education investment is negative, indicating that narrowing the education investment gap between urban and rural will expand Urban-Rural income gap. The main reason for this phenomenon is the rural human capital loss for the urban human capital; the coefficient of health investment is positive, indicating that narrowing the investment gap between medical care and food expenditure will suppress the expansion of income gap between urban and rural areas; the coefficient of transfer investment is positive, indicating that narrowing the transfer investment gap can promote Urban-Rural income gap. Finally, based on the existing results, the paper puts forward two countermeasures and suggestions, mainly from two aspects:To increase human capital investment and to reduce the loss of human capital.