Industrialization, urbanization and urban-rural income gap: An empirical analysis of China

The sustainable social and economic development can be constrained by widening income gap in context of boosting economy. In this paper, we first attempt to analyze the interaction mechanisms among industrialization, urbanization and income gap for Chinese data within the framework of vector auto-regressive model. The empirical results support Lewis´s dual economic model and Chenery´s theory. It is suggested that urbanization has a significantly positive long-term effect on narrowing the income gap between urban and rural areas, while the contribution of industrialization for narrowing this gap is not notable.