Urban-rural income polarization and economic growth in China: evidence from the analysis of a dynamic panel data model

Using a dynamic panel data model and the system GMM, this article examines the relationship between urban-rural income polarization and economic growth at the provincial level in the period 1995 to 2010 in China. The estimated results and significant tests indicate that a certain degree of urban-rural income polarization is beneficial to economic growth at the provincial level in both stages for China as a whole, though the contribution of urban-rural income polarization to economic growth is relatively small. Aggravating urban-rural income polarization has a negative impact on economic growth in China. Based on a cluster analysis of regional economic growth at the provincial level, the authors carried out the same analysis separately for two categories of regions too. The results for those two categories of regions show that positive correlations also exist between urban-rural income polarization and economic growth in both stages, which are very similar to the analysis for the whole of China. In addition, a meaningful finding can be derived that the contribution of consumption growth rate to economic growth rate in the second stage is smaller than that in the first stage obviously.