:,,,, ( ), ( ),,,, :,, ;,,,,,,,,,, ( Yang and Zhou,1999),,,,,,,,,,,,, Aghion Howitt (1992),,,,,,,,,,,, ;,,,, Galor and Zeira (1993) Fishman and Simhon

3 :,,,,, ( ) ( ), d,, :,,,,, :,, ( Yang, 1999, Wu and Perloff, 2004, Benjamin et al, 2004, Wan,Lu and Chen, 2006), (,2003),,,, Benabou (1996) : ( ),,, (Croix and Doepke, 2004) 3,, :200433, :ling. shen @mail. shufe. edu. cn,gtian @mail. shufe. edu. cn 211, 2007, (2003), (,Berg and Sachs,1988 ; Persson and Tabellini,1994 ;Alesina and Rodrik,1994 ;Clarke,1995),,,(Forbes,2000),,(Chen,2003 ;Banerjee and Duflo,2003) 17

:,,,, ( ), ( ),,,, :,, ;,,,,,,,,,, ( Yang and Zhou,1999),,,,,,,,,,,,, Aghion Howitt (1992),,,,,,,,,,,, ;,,,, Galor and Zeira (1993) Fishman and Simhon(2002) Benhabib and Rustichini (1996) Benabou(2002) Li and Zou (1998) Zweimuller (2000, 2005),, : Shaked and Sutton (1982, 1983) 18

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, :,,, GDP,,,,, GDP,,,,,,,, GDP,,,,,,,, ;,, 1, 4 1, 013 ( 015) [ 015-015 012 015-015 012-015 (1-012) 015 ]Π015 = 013 19

:,, 011 :,,, 2, 3 ;,, 01922, 2163,, :,?, ( ),,,, ((6) ),,,,,, 1 : 013,,,,,,,,,,,,,,, ( ),,, : : :, ( ) 1,(0 < < 1),,,,,,,,, 20

1 -,,, ( w), i A i,,a i i, i = p, r i y i = w + A i ( A r > A p ), ( y r > y p ),, A p = dv, d (0 < d < 1),, V, V = A p + (1 - ) A r A r = 1 - d 1 - V 5A r Π5 > 0, d V,, V 1, x,, P x wb, w, b 1, P x = wb = 1 q j, j = 0, - 1 k ( k > 1) : q 0 = kq - 1, wa, a (0,1), k ( q 0 ), P 0, ( q - 1 ),, q - 1, P - 1 wa,,, ( ),,,,,,,,, ( x i ) : y i = 1 x i + P j 1, j = 0, - 1 : u i ( x i, q j ) = ln x i + ln q j i = p, r, j = 0, - 1 (1) : u i = ln ( y i - P j ) + ln q j,,, d,,, 21

: ( ), (steady state) P - 1 = wa q 0 q - 1, q 0 P 0 : ln ( y i - P 0 ) + ln q 0 = ln ( y i - wa) + ln q - 1 (2) i q 0, q - 1 q 0 q - 1, q 0 q 0 = kq - 1, : P 0 = 1-1 k y i + wa k,, : (Pooling) (Separating),,,, : pool = 1-1 k (3) ( y p - wa) (4) : sep = (1 - ) 1 -,, 1 k pool ( y r - wa) (5) sep, : y r - y p ( y r - wa) (6),,, (6), (6) d (1 + ) 1, : ( ),,,, ( ) 2 30 d (1 + ) (1978 1985 ),,,, 21, 1,,, (6),,,,,,,,,, ( Pooling (forthcoming) equilibrium ), Shen (6), 2 :1 - d (1 + ) w (1 - a)π V,, : 2007 0 1 - d (1 + ) 0 22

( ), k Aghion Howitt (1992),, <, n,, n, <, < = n wn, <B, B : B = (1 + t = 1 ) t Pr (0 t) = t,pr (0 t) t, < e t = 1 (1 - < e ) t - 1 (1 + ) ] t B = < e + (7) = n e, n e V,: V = - wn - V (8) V,, V,V,, V,,, V d,, ( ) : < V <,,,, < V,(8) : = wn + V (9),, 1 :, n ;, a ;, b[ x p + x r (1 - ) ], x p x r : 1 = n + a + b[ x p + x r (1 - ) ] (10) x r = y r - P 0 x p = y p - wa,, (9) (free entry),, wn = <B = nb (perfect foresight), < = < e ( n = n e ), : 1, 23

: w = < +, ( ),, <,, :,,,,,,,, ( ) (5) (9) (11),: (11) V 3 = w (12) < 3 = 1-1 k [ (1 - ) (1 - ) + (1 - d ) ] - (13) : (6),,,,,( d) : (13) d < 3,, Shen (2004,forthcoming), (1 - d) ( d) ( ),,, ( d), A r = 1 - d V d 1 -,,,, < 3,, d,, < 3,, ( ), ( da r Πd > 0),, (1 - d ), (5),, ( < 3 ),,,,,, 0,,,,,,, 5 y r = w + 1 - d 1 - V, sep = 1 -,, 24 1 k ( (1 - d ) V + w - wa),

1 ( ) Part 1 : 67 included countriesπregions CountryΠReg. Year Gini Quntile 1 Quntile 2 Quntile 3 Quntile 4 Algeria 1988 38173 010680 011777 013271 015345 : Australia 1990 41172 010460 011430 012980 015360 Bahamas 1989 44154 010303 011207 012766 015232 Banglades 1989 28185 010950 012280 013980 016140 Belgium 1988 26163 010848 012270 014137 016492 Bolivia 1990 42104 010562 011528 012981 015177, Brazil 1989 59160 010248 010740 011655 013482 Canada 1990 27156 010754 012111 014657 016615 Chile 1989 57188 010370 011050 012080 013700 China 1990 34160 010701 011890 013504 015902 Colombia 1991 51132 010360 011239 012528 014565 Costa Rica 1989 46107 010400 011310 012740 014930, Cote d Ivoire 1988 36189 010678 011796 013374 015592 Denmark 1992 33120 010548 011754 013670 016217, Dom. Rep. 1989 50146 010420 011210 012460 014430 Egypt 1991 32100 010871 012120 013747 015891 Finland 1991 26111 010778 012241 014212 016620 Ghana 1989 36174 010697 011831 013407 015586 Greece 1988 35119 010619 011778 013482 015882 2007, Guatemala 1989 59106 010210 010790 011840 013700 Guinea Bissau 1991 56112 010206 010853 012055 014114, Guyana 1993 40122 010627 011695 013193 015309 1980 0178 Honduras 1992 52163 010384 011181 012413 014367 Hong Kong 1991 45100 010489 011507 012944 015063 2006 0150 Hungary 1989 23134 011087 012562 014360 016557, India 1990 29169 010910 012220 013910 016090 Indonesia 1990 33109 010920 012131 013747 015805 1980 19139 % Ireland 1987 34160 010493 011464 013048 015540 2006 Italy 1989 32174 010835 012152 013884 016190 4319 % d Jamaica 1990 41179 010598 011586 013031 015163 Jordan 1 -, 1991 40166 010647 011676 013137 015231 Kenya 1992 54139 010339 011011 012084 013816 Korea, R1 1988 33164 010739 011968 013595 015776, Lesotho 1987 56102 010287 010927 012052 014001, Madagascar 1993 43144 010585 011565 012978 015016, Malaysia 1989 48135 010458 011291 012590 014627 Mauritius 1991 36169 010670 011830 013400 015660 Mexico 1989 54198 010320 011020 012170 014070 Morocco 1991 39120 010657 011702 013199 015370 Benabou ( 1996 ) Netherlands 1991 29138 010692 012107 013997 016364 New Zealand 1990 40121 010458 011510 013141 015527, Nicaragua 1993 50132 010420 011220 012480 014490 Niger 1992 36110 010748 011930 013477 015588, 25

: 1 CountryΠReg. Year Gini Quntile 1 Quntile 2 Quntile 3 Quntile 4, Nigeria 1992 41115 010660 011687 013126 015171 Norway 1991 33131 010540 011657 013358 015845 Pakistan 1991 31115 010840 012127 013814 016030 (the world de2 Panama 1989 56147 010200 010830 011990 014020 velopment index,world Philippines 1988 45173 010520 011430 012760 014750 Bank) Poland 1990 26124 010952 012354 014147 016428, Portugal 1990 36176 010570 011690 013380 015760 Puerto Rico 1989 50186 010290 011000 012340 014680 Senegal 1991 54112 010350 011048 012207 014138 Singapore 1988 41100 010652 011727 013063 015341 South Africa 1993 62130 010202 010687 011635 013513 Spain 1989 25191 010839 012271 014139 016472 Sri Lanka 1990 30110 010892 012205 013894 016066, Sweden 1990 32152 010740 012010 013680 016180 d Tanzania 1993 38110 010685 011775 013303 015456 Thailand 1990 48180 010400 011230 012480 014480, Tunisia 1990 40124 010586 011627 013154 015367 Deininger et Turkey 1987 44109 010524 011485 012891 015006 al. (1996) Uganda 1989 33100 010852 012061 013658 015807 ( the quntile UK 1990 32130 010778 012037 013626 015901 data), USA 1990 37180 010460 011540 013200 015580 Venezuela 1990 53184 010361 011067 012232 014159 Zambia 1991 43151 010557 011515 012931 015029, Forbs Zimbabwe 1990 56183 010398 011027 012028 013766 (2000) Part 2 :13 excluded countriesπregions,q1 CountryΠReg. Year Gini Quntile 1 Quntile 2 Quntile 3 Quntile 4 20 % Armenia 1989 39139 010170 011350 013250 015940 Bulgaria 1990 24153 011054 012578 014283 016543,q2 Czechoslovakia 1991 24160 011086 012484 014230 016450 40 % Kazakhstan 1993 32167 010749 011981 013672 015961 Kyrgyz Rep1 1993 35132 010670 011820 013462 015774, Laos 1992 30140 010955 012247 013873 015976 Latvia 1993 26198 010960 012320 014068 016327 Lithuania 1993 33164 010809 012043 013665 015792 GDP, Romania 1989 23138 010998 012488 014360 016677 Slovak Rep1 1992 19149 011186 012770 014645 016865 Slovenia 1992 25195 011012 012414 014169 016387 Ukraine 1992 25171 010954 012366 014170 016462 Vietnam 1992 35171 010780 011920 013460 015700 Data : from Deininger et al. (1996). 26

, 90,, 1990,, 1990, 80 ( ), 90, 13,, 1 80 ( ), 67 ( ), 13 2 67 ( ) OLS 3 Q1 2 Std. N Minimum Maximum Mean Deviation,, 20 % GDP90 67 144100 28059100 616414030 826515902 GROWTH( %) 67-61147425 91549096 3136722835 2169669196 3, GINI90 67 23134 62130 4111630 1010198 Q1 ( %) 67 2100 10187 518021 211638 GDP ( %) 67 01000000 891088800 45180618806 23131617248, d Q1,, GDP : GDP90 1990 GDP, GROWTH 1990 2004 GDP GINI90, Deininger et al. (1996) Q1, 20 % Deininger et al. (1996) 1990, 3, d = q1 d = q1 d = q2 d = q1π(1 - q4) (Constant) 41163 241538 361479 151931 (31257) (31238) (31045) (21342), GDP90-4140E205-1171E204-1163E204-1112E204, ( - 01816) ( - 21463) ( - 21524) ( - 11798) Gini90-01298 - 01436-01185 ( - 21724) ( - 21767) ( - 11700), - 010463-010553 - 010589-010530 ( - 21432) ( - 21998) ( - 31187) ( - 21813) d 01275-01916 - 01715-01136 (11812) ( - 11988) ( - 21239) ( - 01909), R 2 01131 1224 01236 01185, :Dependent Variable : GROWTH. t, :,,, 3,, :,,, Q1 : 27

:,,,,,,,!, Q2 Q1 d 40 %, Q1 3 d = q1π(1 - q4), 20 % 20 %,, d GDP d = q1π(1 - q4), Q1 Q2,,, :, :,,,,,,,,,,,,,,,,,,,,,,, 490.,2003 :, 12, 2007 :, Aghion, Philippe and Howitt, Peter,1992, A Model of Growth through Creative Destruction, Econometrica, 60(2), pp. 323 351. Alesina, Alberto and Rodrik, Dani,1994, Distributive Politics and Economic Growth, Quarterly Journal of Economics, 109 (2), pp. 465 Banerjee, Abhijit V. and Duflo, Esther,2003, Inequality and Growth : What can the Data say?, Journal of Economic Growth, 8 (3), pp. 267 299. Benabou, Roland,1996, Inequality and Growth, in Ben S. Bernanke and Julio J. Rotemberg, eds., NBER Macroeconomics Annual. Cambridge, MA : MIT Press, pp. 11 74. Benabou, Roland,2002, Tax and Education Policy in a Heterogeneous agent Economy : What levels of Redistribution Maximize Growth and Efficiency?, Econometrica, 70 (2), pp. 481 517. Benhabib, J. and A. Rustichini, 1996, Social Conflict and Growth, Journal of Economic Growth, 1, pp. 129 146. 28

Benjamin, Dwayne, Loren Brandt and John Giles, 2004, The Dynamics of Inequality and Growth in Rural China : Does Higher Inequality Impede Growth? working paper, University of Toronto. Berg, A. and Sachs, J,1988, The Debt Crisis : Structural Explanations of Country Performance., Journal of Development Economics, 29, pp. 271 306. Chen, Been2Lon,2003, An Inverted2U Relationship between Inequality and Long2run Growth, Economics Letters, 78, pp. 205 212. Clarke, George R.,1995, More Evidence on Income Distribution and Growth., Journal of Development Economics, 47(2), pp. 403 427. Croix, De La, David and Matthias Doepke, 2004, Inequality and Growth : Why Differential Fertility Matters, American Economic Review, 93 (4), pp. 1091 1113. Deininger, K and Squire L. 1996 New Data Set Measuring Income Inequality, World Bank Economic Review, 10, pp. 565 591. Fishman, A. and A. Simhon, 2002, The division of Labor, Inequality and Growth, Journal of Economic Growth, 7, pp. 117 136. Forbes, J. Kristin,2000, A Reassessment of the Relationship between Inequality and Growth, American Economic Review, 90 (4), pp. 869 887. Galor, Oded and Joseph Zeira, 1993, Income Distribution and Macroeconomics, Review of Economic Studies, 60, pp. 35 52. Li, Hongyi, and Heng2fu Zou, 1998, Income Inequality is not Harmful for Growth : Theory and Evidence, Review of Development Economics, 2(3), pp. 318 334. 3 13. Persson, Torsten and Tabellini, Guido,1994, Is Inequality Harmful for Growth? American Economic Review, 84 (3), pp. 149 187. Shaked, Avner and Sutton, John,1982, Relaxing Price Competition through Product Differentiation, Review of Economic Studies, 49, pp. Shaked, Avner and Sutton, John,1983, Natural Oligopolies, Econometrica, 51, pp. 1469 1483. Shen, Ling,2004, Education, Income Distribution and Innovation, Discussion paper of Bonn Graduate School of Economics, No. 11. Shen, Ling,Forthcoming, Urban2rural Disparity : the Demand Analysis, Journal of Developing Areas. Wan, Guanghua, Ming Lu and Zhao Chen, 2006, The Inequality2Growth Nexus in the Short and Long Runs : Empirical Evidence from China, Journal of Comparative Economics, 34 (4), 654 667. Jeffrey. Wu, Ximing and Perloff, M. Jeffrey,2004, China s Income Distribution Over Time : Reasons for Rising Inequality, home page of the Yang, Dennis Tao and Zhou, Hao,1999, Rural2urban Disparity and Sectoral Labor Allocation in China, Journal of Development Studies, 35 (3), pp. 105 133. Yang, Dennis Tao,1999, Urban2biased Policies and Rising Income Inequality in China, American Economic Review, 89 (2), pp. 306 310. Zweimuller, Josef. 2000, Schumpeterian Entrepreneurs Meet Engel s Law : The Impact of Inequality on Innovation2Driven Growth, Journal of Economic Growth, 5(2), pp. 185 206. Zweimuller, Josef and Brunner, K. Johann. 2005, Innovation and Growth with Rich and Poor Consumers, Metroeconomica, 56 (2), pp. 233 262. Income Inequality, Urbanization and Economic Gro wth : A Demand2side Analysis Shen Ling and Tian Guoqiang (School of Economics, Shanghai University of Finance and Economics) Abstract : Urban2rural disparity is an important source of income inequality in China. This paper investigates the demand2side effect of income inequality on economic growth. Income inequality can be measured by the population share of the rural residents and their relative income. Economic growth is represented by quality improvement driven by innovations of monopolistic firms. Since rich consumers are more willing to pay high prices for the better quality than the poor, the firms profit depends on the income disparity of consumers1 At the separating equilibrium, goods of different quality levels are sold to different consumers. A higher relative income of the urban residents is good for innovations, but a larger population share of the rural residents is bad for innovations. Our empirical evidence supports our theoretical prediction. Key Words : Inequality ; Urban2rural Disparity ; Urbanization ; Economic Growth JEL Classification :D31, D43, O12, O15 ( : ) ( : ) 29