URBANIZATION AND RURAL-URBAN CONSUMPTION DISPARITY: EVIDENCE FROM CHINA

The objective of this paper is to investigate the impacts of urbanization on influencing the rural-urban consumption disparity in China, a research gap which has not been bridged so far. Adopting a provincial dataset from 1997 to 2014, a generalized method of moments (GMM) estimator is employed to reveal the impact of urbanization on the ratio of per capita consumption expenditure of the urban households to the rural households, along with other socioeconomic variables. Empirical results show salient relationship between increasing urbanization ratio and declining rural-urban inequality. Significant impact of education costs on increasing the rural-urban inequality is also observed. Other factors that increase the disparity include foreign investment and gross regional product (GRP) indices. Industrial structure, costs of housing and health care are insignificant factors. The results of this study help in understanding China's new urbanization development strategy in a better way.