Chinese decentralization and income inequality between urban and rural residents--An empirical study based on the dual dimensions of internal and external budget

The paper firstly explains the mechanism of decentralization on income inequality from two theoretical dimensions of internal and external budget.Based on the re-measurement of income Gini coefficient and Chinese decentralization level,this paper establishes panel data model from national and regional perspective to empirically investigate the impact of Chinese decentralization on income inequality between urban and rural residents.Firstly,the promotion of budgetary income decentralization is conductive to reduce income inequality of urban and rural residents whether it is from the national or sub regional.Second,although the promotion of budgetary expenditure decentralization exacerbates the urban-rural income inequality in the national level,it could obviously reduce the urban-rural income inequality in the midwest with relatively low level of budgetary expenditure decentralization.Thirdly,the impact of extra-budgetary decentralization on income inequality is consistent,no matter in the whole country,in eastern or in western regions.This means that the extra-budgetary income decentralization makes the income inequality between urban and rural residents worse while the extra-budgetary expenditure decentralization reduces the income inequality between urban and rural residents with different degrees.Fourthly,the transfer payment,years of schooling and urban unemployment rate are conductive to narrow the income inequality between urban and rural residents while the impacts of economic development,urbanization and opening degree are obviously different in different regions.The above conclusions can not only be used for reference to further perfecting and reshaping the fair efficiency mechanism of Chinese decentralization,but also indicates the direction of the new fiscal and tax system reform.