Does FDI Increase Urban-rural Income Gap Of Provinces

Since the reform and opening up in 1979,the economy of our country has developed rapidly.At the same time,foreign direct investment(FDI)developed rapidly in China,becoming a strong power which drives the economic growth.To the year of 2014,China's total actual use of foreign direct investment is up to $1,513 billion.Only in 2014 the amount of actual use of foreign direct investment is $119 billion.China's utilization of FDI has made great achievements.Meanwhile the gradually enlarged urban-rural income gap attracts people's concern.In 1999,China's Gini coefficient is 0.404,breaking the international warning line of 0.4.Thereafter it continued to grow.From 2003 to 2013 China's Gini coefficient remained high,hovering between 0.47 and 0.49.In 2014 it is slightly lower,but also achieved a high level of 0.469.Foreign direct investment greatly increases the number of urban enterprises,generally rises the wage income of urban residents and also attract a considerable number of rural residents migrant into the cities to work and it also have a positive effect in improving farmers' income.Therefore,studying the impact of FDI on the income gap between urban and rural areas has important theoretical and practical significance in narrowing income gap and building a harmonious society.This paper is divided into three parts:The first part includes the third chapter.It makes a relatively detailed analysis on the status of FDI in China's mainland and urban-rural income gap.Foreign direct investment is characteristic of unbalance.Specifically,in terms of origin,Hong Kong SAR,Macao SAR and Taiwan region are the main origin areas of FDI in China's mainland while other countries invest much less;in terms of regional distribution,FDI is mainly distributed in the eastern coastal region,rarely in central and western inland areas.In terms of the industry distribution,FDI transformed from focusing on the second industry to focusing on the second and the tertiary industry,of which FDI is distributed the most in manufacturing and real estate.In the recent decades the urban-rural income gap is widening and the urban-rural income gap between regions is also unbalance,which is big in eastern area and small in central and western inland area.Urban-rural income gap is the result of many factors,and foreign direct investment also influences it.We should properly resolve the urban-rural income gap problem,preventing social unrest caused by this.The second part includes the fourth chapter.It makes an analysis of transmission mechanism of FDI affecting urban-rural income gap.FDI mainly affects urban-rural income gap in three ways,namely,employment structure,industrial structure and trade.The employment structure is divided into employment structure in urban and rural Residents,employment structure in enterprises of different ownerships and employment structure in different industries,by which FDI affects urban-rural income gap.In terms of industrial structure,since FDI concentrates on the second and tertiary industries,it is possible to significantly increase the wages of employees in the second and tertiary industries.And because the second and tertiary industries have a large number of migrant workers who are from rural area,thee income of migrant workers also improves.In terms of trade,FDI influence income gap mainly through trade scale and trade structure.The development of trade ultimately widen urban-rural income gap.The third part includes the fifth chapter.It studies the effect of FDI on the income gap between urban and rural areas through empirical test.This part includes three steps.In the first step,this paper establishes a mixed OLS and fixed effect model respectively with 1998-2014 panel data and come to the conclusion that FDI narrows the income gap between urban and rural areas.In the second step,this paper uses spatial econometric model to study the spatial correlation and heterogeneity of FDI affecting urban-rural income gap.Firstly use the computed result of global Moran's I index to prove the presence of spatial autocorrelation of urban-rural income gap.Secondly,use local Moran's I index to analyze the spatial autocorrelation and clustering between various provinces.Thirdly,build respectively SAR and SEM,whose results indicate that urban and rural income gap in different provinces exists spatial correlation.Lastly,with the model of WGR,embed every province's spatial location which is each province city's center coordinates to the model to estimate the influence direction and degree of FDI on urban-rural income gap.Regression results show that from 2008 to 2013 provinces' absolute value of coefficient of FDI's influence on the income gap between urban and rural areas all shrink to different degrees.FDI in eastern region play less important role in narrowing the income gap between urban and rural areas and the change is not obvious in central and west areas.In the third step,this paper make empirical analysis on the transmission mechanism of the effect of FDI on urban-rural income gap.Regression result shows that FDI narrows the income gap through increasing the proportion of tertiary industries,narrow the income gap through reducing value-added of first industry and widen income gap through increased import and export.