Rural-urban income disparity: impact of growth, allocative efficiency, and local growth welfare

Historical data of economic development suggest a Kuznets-Williamson type of relationship between economic growth and income disparity. Using China's provincial data, we first try to determine to what extent such a relationship is valid in the urban-rural disparity context. Next, we identify some factors other than economic growth that might have affected urban-rural disparity. In particular, we calculate and compare the inter-sector gross allocation effect (GAE) at the provincial level to discern the impact of labor mobility and allocative efficiency on urban-rural disparity. We also try to evaluate the contribution of local governance to urban-rural disparity by looking into regional differences in effectiveness of economic growth to raise local standard of living. Policy implications of the findings are discussed in the light of China's institutional reforms and development strategies. (C) 2002 Published by Elsevier Science Inc.