A Study On The Effect Of Residents' Education Investment Gap To The Income Gap Between Urban And Rural Areas

Over the years,China's economic growth has been "8%" as the goal.Although the GDP is declining in the years,but China's economy is still developing rapidly.In this process of the development,social problems are endless.And the problem of the income gap is getting worse.In this problem,the main contributor to the problem is the urban-rural income gap.When market economy and knowledge economy develop rapidly,educational investment that is the core part of human capital is linked with the economic development.To research the effect of residents' educational investment gap to the income gap between urban and rural areas,the paper researches the effect of educational investment to the human capital,and then the effect of the accumulation of the human capital to the urban-rural income gap.That means the human capital is the intermediate factor.Most of the literatures research the effect of educational investment gap to income gap between urban and rural areas from the financial investment in public education,but this paper researches the effect from the perspective of the residents' input.When the government's spending on education increases,rural residents should pay more attention to education and education investment.And they should be the participators involved in education,rather than being indifferent spectators.More participants make the rural education conditions improved.And then it's meaning to narrow the income gap between urban and rural areas.In order to make the results of the empirical research more accurate and reliable,this paper considers the dynamic effects of the variables,and we analysis the data by using the dynamic panel data model.Choosing the double residual method makes the correlation coefficient more accurate and effective.The paper not only researches the effect by the data from the 31 provinces,but uses the cluster analysis method to classify the 31 provinces into three clusters,then researches the effect in each cluster.In the paper,I use the dynamic panel data model estimated by using GMM,and also use the double residual method.In the model,I select financial development which is the ratio of credit scale to GDP,economic opening which are the ratio of FDI to GDP and the ratio of export trade to GDP,and governmental economic effect which is the ratio of government spending to GDP as the control variables put in the model.Finally,whether from the national level or three clusters,I find that the effect of residents' educational investment gap to the income gap between urban and rural areas is positive on the relationship.And the effects of the three clusters are different.Meanwhile,financial development,government spending,foreign direct investment have a significant impact on the income gap.The paper's characteristics reflected in the following aspects:Firstly,the focus of this paper is to the effect of residents' education investment gap to the income gap between urban and rural areas.It is different to the literatures about the education and income.This paper considers the educational investment from the residents,not the public expenditure on education like most literatures.From the perspective of the investment in education,there are two investments:residents' investment and government investment.When the government investment is increasing,the residents' investment should be paid more attention.Secondly,most of the literatures use the time series data,cointegration test method or panel data model and so on.Less of them consider the dynamic effect of the variables.So in this paper uses the dynamic panel data model to study the effect of residents' education investment gap to the income gap between urban and rural areas in considering the dynamic effects of the income and education.This paper doesn't use the method of the administrative division,but uses the cluster analysis method to classify the 31 provinces into three clusters.And though these methods,the study will be more accurate and meaningful.In this study,there are shortcomings due to the limited capacity.Firstly,in the paper we use the average per capita of rural households during the study year-round entertainment and cultural education services spending as the rural residents' investment in education,use average annual urban households entertainment and cultural education services per capita consumption expenditure of urban and rural residents as the urban residents' investment in education.Although both the sets of data reflect the investment situation in urban and rural areas,the data is not perfect to make the results maybe bias.But this will not make the result wrong.Secondly,there are many papers giving so many advices to narrow the income gap.This problem is a hot topic in politics or academia.So this paper doesn't give the meaningful advices,only study the effect of residents' education investment gap to the income gap between urban and rural areas.