Factor Analysis Of Urban-rural Income Gap

Since the Chinese Economic Reform, the economy of Shandong Province developed rapidly. The nominal GDP of Shandong increased from25.16billion yuan in1979to4.536185trillion yuan in2011and by17.05percent annually which is more than national average growth rate. Ruling out price change, real GDP increased by11percent annually from24.985billion yuan to861.167billion yuan which is as34.5times as that in1979. The actual value of GDP per capita rose from347.57yuan to8986.26yuan, with the average annual growth rate of10.00%. With rapid economic development and improvement in life quality in urban and rural areas, the income gap has increased bigger and bigger. The overall income gap between urban and rural areas expanded from248.23yuan in1979to2715.71yuan in2011. The ratio of urban and rural income fluctuated during this period. From1979to1983, it decreased from2.56to1.58. Then it rose to2.52in1993. After a brief decline to2.00by1998, the ratio kept increasing from1998to2009, and it reached the highest level2.81in2009. In recent years, the government becomes paying more attention to the development of rural areas and agriculture in order to reduce the income gap between urban and rural areas. The proportion began decreasing from2009. But what influences income gap between urban and rural areas on earth? And what kind of relationship is it?To solve this problem, this paper is based on the endogenous economic growth model with the assumption of the urban and rural economy. Then we built the urban and rural production function and get the urban-rural income gap function. It is clear that the income gap between urban and rural relates to expenditure on agriculture, on education, urbanization level and other factors. According to the regression with the panel data of17cities in Shandong Province from2002to2011, we concluded the factors that affect the overall level of income gap between urban and rural areas of Shandong province. Then Shandong province can be divided into the eastern, central and western, and we made regression analysis with data of these areas. Regional analysis results are slightly different. Additionally, we can get that increasing education expenditure can significantly reduce the income gap in three regions, increasing expenditure on agriculture in eastern and central can significantly reduce the income gap, increasing fiscal expenditure in the central and west can significantly reduce the income gap and the development of secondary and tertiary industry in central will significantly expand the gap.On the basis of these conclusions, we put forward the corresponding policy recommendations, such as improving the fiscal expenditure structure, improving the rural financial service system, promoting the urbanization process, etc.