The Impact Of Urban-Rural Consumption Gap On Economic Growth

In the background of theurban-rural dual economic structure in China, this paper designs a dynamic panel threshold model to explore the long-term impact of urban-rural consumption gap on economic growth. The consumer’s plutocratic gap will be applied as a measurement of the consumption gap, which is regarded as the threshold variable. As for control variables, in addition to taking population, investment, foreign trade and tax factors into consideration, we also introduce lags of economic growth as an explanatory variable, in order to study the dynamic relationship between the economic variables. The empirical analysis is based on a panel-data set including 29 provinces of china in addition to Hong Kong, Macao, Taiwan, Chongqing and Tibet during the period from 1994 to 2013. Based on the results of the panel unit root tests and threshold effect significance tests, we apply a two-stage pooled least squares method to choose instrument variables and estimate the thresholds, then estimate the parameters in the model with GMM. As a conclusion, anon-linear relationship with regime switching exists between urban-rural consumption gap and economic growth in our country, there are two thresholds, which are estimated as 0.046 and 0.573. Therefore, the consumption gap between urban and rural dynamic impact on economic growth is divided into three regimes: When gap is less than the lower threshold 0.046, the urban-rural consumption gap effectseconomic growth positively, but not significantly. When the gap is between the two threshold values, the consumption gap between urban and rural can significantly promote economic growth; when the gap exceeds higher threshold0.573, the threshold variable slope coefficient is estimated as-2.376, suggesting that continued differentiation between urban and rural will be spending a serious constraint on economic growth.Furthermore, the control variable slope coefficient estimation results show part of control variables have long-term effects on economic growth, including natural growth rate of population is detrimental to economic growth, direct and indirect taxes effect on economic growth in different ways, and the path of economic development between the various regions of our country contrary to the catch-up effect inneoclassical economics.