Political Systems, Urban Bias and Urban-Rural Income Gap: An Empirical Study on the World Panel Data, 1990-2010

Abstract

This paper examines the mechanism of political systems influencing urban-rural income gap. Fixed effect models and dynamic panel data models with a cross-national panel data of over 100 countries from 1990 to 2010 are used to estimate the relationship among political systems, urban bias and urban-rural income gap. Empirical study finds that democracy tends to reduce urban-rural income gap by entitling residents with equal political rights to prevent urban biased policies. Besides, urban bias in basic public services are found taking an intermediate role between democracy and urban-rural income gap, i.e., negatively correlating to democracy while positively correlating to urban-rural income gap. The results highlight the political system origin of urban-rural income gap which provides an alternative way-out for long-lasting huge urban-rural income gap.