Urban-biased policy, government intervention and urban-rural income gap: evidence from provincial government work reports in China

• Published in: Kybernetes 2024-11, Vol.53 (11), p.4929-4947
• Main Authors: Nie, Changfei, Wang, Haohui, Feng, Yuan
• Format: Article
• Language: English
• Subjects: Agricultural production; Developing countries; Economic development; Economic growth; Housing prices; Income; Income inequality; Industrial development; LDCs; Market prices; Public services; Rural areas; Rural development; Subnational government; Urbanization
• ISSN: 0368-492X; 1758-7883
• DOI: 10.1108/K-01-2023-0084

PurposeThis paper aims to test the causal relationship between urban-biased policy and urban-rural income gap and further examine the moderating role of government intervention.Design/methodology/approachBased on the provincial Government Work Reports and the long-term policy practice of implementing the target responsibility system, the authors construct a unique indicator of urban-biased policy in China. Further, applying the panel data of 30 Chinese provinces in 2003–2018, the authors explore the causal relationship between urban-biased policy and urban-rural income gap.FindingsThe results show that urban-biased policy has contributed to the widen urban-rural income gap in China, which supports Lipton's urban-biased hypothesis. Further research shows that the stronger the government intervention, the bigger the role of urban-biased policy in widening urban-rural income gap.Originality/valueOn the one hand, this study not only investigates the direct effect of urban-biased policy on urban-rural income gap, but also examines the moderating effect from the perspective of government intervention, which helps to enrich the relevant studies of urban-biased theory. On the other hand, the authors' findings provide the latest empirical evidence for urban-biased policy to widen urban-rural income gap and presents a reference and warning for China and other developing countries about balancing the relationship between equity and efficiency during economic development.