How does the urban-rural income disparity affect economic growth?

Abstract

The overall relation of urban-rural income inequality to economic growth is complex. As the widening income gap between urban and rural areas, the rural residents are unwilling and unable to invest in human capital, which restricts China's long-term economic growth. By empirically analyzing Chinese provincial panel data from 1995 to 2012, we find the material capital investment and the human capital investment have highly significantly positive coeficients for explaining economic growth, however, the urban-rural income disparity is significantly negative for the human capital investment, moreover, the change shows that there is a negative influence of urban-rural income disparity on the economic growth.