The Research Of Labor Supply Quality Influence On The Income Gap Between Urban And Rural Areas

This paper based on the historical development of the urban-rural income gap in China, It is saying that the improvement of rural income is the key to improving the income gap between urban and rural areas. And with the decomposition of the GINI coefficient in rural areas, it means the main reason for China’s rural income gap is the difference between the wage income. It has become our main starting point for the further improvement of the income gap between urban and rural areas.According to the human capital theory, wage income is actually the price of labor value in the market, generally speaking, the labor supply is divided into two vertical and horizontal direction, and according to the theory of demographic dividend and population bring-up ratio, the number of labor is vertical supply has lost its advantage to promoting the development of economy at present, horizontal quality of Labor supply is the main trend in the present stage of economic development. According to Mincer equation theory, education can be applied to Labor supply quality and further improve the income. The improvement of the income gap between urban and rural areas, not only to promoting the development of the education investment, but improving the quality of labor supply in the further future. Therefore the income gap between urban and rural areas and the quality of labor supply has both influence to each other, not just a single relative relationship.Therefore, this article names labor supply quality as fixed number of year of the education, and defines the urban-rural income gap in urban and rural with the income ratio. This paper is creatively taking regional differences as virtual variable into the simultaneous equations, and giving a two-way research between Labor supply quality and the influence of the relationship between the income gap between urban and rural areas. By establishing with simultaneous equations of other relevant variables, and combining the three stage least squares method, it is concluded that the income gap between urban and rural areas and the labor supply quality influence each other. To test the model’s stability, we use weighted income ratios as the income gap between urban and rural areas instead, then set up simultaneous equations. Finally, for the further study of labor supply quality and dynamic effect mechanism of the income gap between urban and rural areas, I adopt the static and dynamic panel to discuss the influence of independent education through the regional differences of the quality of labor supply and explain its dynamic change and mutual influence at the end of the paper.