Public Education Expenditure Structure’s Impact On The Urban-rural Income Gap

Since the reform and openness, people’s living standards has been gradually improving with the rapid development of the national economy and the advancement of the society. Meanwhile, the urban-rural income gap has also become wider and wider, which has become a focus in academic and political circles. The widening income gap may lead to a serial of economic and social problems, so the government is working to cope with it. It is noncontroversial that education expenditure acts as the basic path to human capital investment, and plays an important role in income rising. However, different public education expenditure structure has different influences on the income increasing and gap narrowing. Therefore, we mainly discuss the impact of the public education expenditure structure on the urban-rural income gap.We have firstly put forward our research content and meanings on the basis of reviewing the research background and analyzing the situation, and summarized the historic and current literature on the public education expenditure and the urban-rural income gap in a systematic way. Then we have made a theoretical analysis on how the education expenditure structure influence the urban-rural income gap by using the human capital theory, and come up with our econometric l model by referring Lucas’ human capital model. Next, we have empirically tested and estimated the econometric model by using the panel date that includes the year form 2004 to 2013 and the 31 provinces in China, and made discussion and analysis on the empirical results. At last, based on the above theoretical analysis and empirical test, we present some policy suggestions focused on the education in that we pay much emphasis on the public education expenditure.We find that Different structure of the public education expenditure can form the different levels of the human capital, which has direct impact on the degree of income gap. City-oriented policy for the education expenditure on one hand results in the inefficient input on the rural education, especially the primary education, and the educational infrastructure construction, thus leading to a low level of human capital and low income; on the other hand, the efficient expending on the urban education, especially the higher education, thus leading to the high level of human capital and high income. In terms of the grade structure of the public education expenditure, elementary education and secondary education attribute more stronger to narrowing the urban-rural income gap than the higher education. In terms of the grade structure of the public education expenditure, public education infrastructure expenditure can better improving the income gap. Therefore, the government are supposed to make policies aiming at adjusting the public education expenditure structure, optimizing the human capital structure, and thus reducing the urban-rural income gap.