Have the Factor Price Distortions Widened the Urban-rural Consumption Gap?

• 1、School of Economics and Trade,Hunan University,ChangSha 410006

Abstract：Factor price distortions and urban-rural consumption gap are two thorny problems in China's market-oriented reform. Based on China's inter-provincial dynamic panel data from 2000 to 2016, two-step system GMM is used to explore the urban-rural consumption gap from the perspective of factor price distortions. It shows that the factor price distortions have significant positive effects on the consumption gap between urban and rural residents, and labor price distortion exerts more positive force than capital price distortion. For different levels of urban-rural consumption gap, factor price distortions enlarge enjoyable consumption gap is greater than that of survival consumption gap. The labor price distortion widens developmental consumption gap, and capital price distortion narrates developmental consumption gap. If we estimate separately for urban and rural areas, there are degree differences in the factor price distortions to reduce residents' consumption and the negative effect on rural residents works better than that of urban residents. By changing the measurement index of the urban-rural consumption gap, it is found that the factor price distortions have strong robustness in widening the urban-rural consumption gap.

Keywords： Urban-rural Consumption Gap Factor Price Distortions Survival Consumption Gap Enjoyable Consumption Gap Developmental Consumption Gap