Abstract：The widening income gap among provinces of china is a serious problem for both the society and the economy. Using the data of 30 provinces in mainland from 1994 to 2008, this paper studies how the provision of human capital related pubic goods by local government affects the income gaps among provinces under the background of tax-sharing system. It’s found that the human capital relies on the material capital when raising capita income. Only when material capital is above some specific level, the human capital has a significant positive effect on capita income. Because of the mobility of labors, there is a minimum material capita capital above which one province can take the advantage of the human capital related public goods provided by nearby local governments to increase capita income, and vice versa. In order to narrow the gap, the mismatching problem of local government expenditure burdens and benefit receiving of tax-sharing system should be solved, that is, the central government and some local governments in rich areas should bear more burdens of the provision of human capital relative public goods.
Keywords: Regional Income Gap, Provision of Public Goods, Tax-sharing System, Material Capital,Human Capital
source:Finance & Trade Economics ,No.1,2013