The Factors that Affect the Income Gap between Urban and Rural Areas of China: Based on the Provincial Panel Data from 2003 to 2012

The income gap between urban and rural areas is one of the most prominent contradictions in the social and economic development of China. Based on the literature review,researching the factors that affect the income gap between urban and rural areas is mainly through theoretical explanations and empirical analysis. Theoretical analysis indicates that the reasons for the income gap between urban and rural areas include urban bias policy,excessive pursuit of economic development and dual structure center- periphery. The results of Panel Data empirical model estimation show that the income gap between urban and rural areas is affected by economic development,policy bias,financial development,economic intervention and other controlling factors. Some factors that can reduce the urban-rural income gap in general include urbanization,economic openness,human capital,agricultural economic development and the development of tertiary industry. However,other factors that can expand the income gap between urban and rural areas are spending on science and education,public service spending,financial development scale and the development of tertiary industry. Therefore,the elimination of income gap should strengthen the development of rural vocational education,pro-mote the urbanization and construct inclusive development policies and effectively achieve the integration of urban and rural development.