Transportation Infrastructure And Income Disparity In China:1978-2013

The recent resurgence of income inequality is one of the most difficult economics problems confronting the world today, which pose great challenges to policymakers in both advanced industrial societies and emerging market economies, there’s no exception for China over this issue. In the study of this paper, I revisit this issue in China and try to explore how major factors, particularly transportation, associated with the widening income inequality, which is measured by Gini coefficient in rural China, urban China, and the overall country.In theoretical study, this paper applies Augmented Solow Model to the study of establishing the linkage between transportation and income disparity. Along the lines of the augmented solow model, this paper constructed an economic growth model by introducing two types of capital, public and private, in a traditional Cobb-Douglas production function. Additionally, the public capital is split into the transport infrastructure and the remaining non-transport capital.As for empirical research, a regression model is applied to explore the income inequality in rural China, urban areas, the whole country as well as the rural-urban income gap. To study the issue thoroughly,18explanatory factors are employed, including demographic variables, economic indicators, and particularly transportation factors. The variance inflation factor(VIF) for each predictor is calculated and useful variables are selected to avoid multicollinearity. Then I do deep analysis according to the result of empirical study with the help of relative importance of each factor. Finally we reach the conclusion that all transportation modes are found to be useful in explaining the urban, rural and overall income disparity in China, but different mode has different effect in different areas. Policy makers should pay more attention to the income redistributive effects of transport infrastructure and service in underdeveloped areas and disadvantaged groups of people to maximize the power of transportation.