Research On Chinese Urban-rural Capital Adjustment Costs And Its Influence Factors

Because the investment environment in rural area of China is less than urban and the capital adjustment costs—which results from varieties of fictional elements when one invests in rural—is higher than urban, the capital flow largely from rural to urban, which consequents are the economic development in rural lacks of motivation, and enlarge the gap of social and economic development of urban-rural gradually. The Thirteen Five-Year is the decisive stage of completing the building of a moderately prosperous society in all respects and the critical stage of crossing over “middle-income trap”, which requires the efficient allocation of production factors between urban and rural area, improving the investment environment in rural areagreatly, and narrowing the gap of social and economic development of urban-rural from the roots. Therefore, in order to recognize the real mechanism of unbalanced allocation of production factors, one need to use appropriate economic theories and models to measure thedifferences of regional investment environment in urban and rural.Based on the macroeconomic data of Chinese urban and rural area in 1981-2014, this paper firstly constructs the moment conditions by using the regular of capital marginal value equates marginal cost, thenestimates the parameters of urban and rural capital adjustment costs by using Generalized Method of Moments, and then computes and compares the relative size of urban and rural capital adjustment costs by using estimated parameters. The estimated parameters of urban and rural capital adjustment costs are 4.141 and 40.817, respectively. Using the estimated parameters above to calculate the average ratios of urban and rural total capital adjustment costs to urban and rural total outputs, which are 24.0% and 58.9%, respectively. The average ratios of urban and rural marginal adjustment costs of one unit of capital to total marginal costs are 26.4% and 88.3%, respectively; to output-capital ratios are 0.814 and 2.894, respectively; to one unit of capital good’s purchase price are 0.385 and 3.513, respectively. These results above indicate rural adjustment costs are always higher than urban and its investment environment is always less than urban since 1980 s.Adjustment costsare generated by a series of frictionalelements. Moreover, based on the definition of adjustment costs, this paper analyzes the influence factors of the differences of urban and rural total capital adjustment costs from the perspectives of government and market’s fictions. The results of multiple regressions claim that nationwide property protection can help to narrow the gap between urban and rural total adjustment costs, but nationwidecorruption,market size, transportation infrastructure and industrial structure enlarge the gap above. Urban total adjustment costs are affected with nationwide non-tax burden and industrial structural, as well as proper financial development, market size and infrastructure,etc. Rural total adjustment costs are significantlyaffected by nationwide non-tax burden, as well as proper market size, etc. Thus, to achieve the balanced allocation of urban-rural production factors and narrow urban-rural developmental gap, the governments should do is continuing to improve the protection of property rights, continuing to promote the construction of anti-corruption, enlarging the rural market size efficiently, promotingthe upgrades and renovation of transportation infrastructure,and adjusting and improving the industrial structuralscientifically and rationally, etc.