Regional Income Mobility of Urban Households, Tax Burden, and Dynamic Equilibrium of Income Distribution

Cui Jinghua, Xie Yuantao

Journal of Finance and Economics Vol. 43, Issue 08, pp. 43 - 55 (2017)  DOI:10.16538/j.cnki.jfe.2017.08.004

Abstract

Based on the lasting income hypothesis and Galton income average model, this paper summarizes the mechanism of the effect of tax on income mobility. Then it analyzes the linkage between dimensional income mobility and tax policy by systematic dynamic panel GMM model and panel Logistic regression in order. It arrives at the following conclusions: firstly, tax burden is one of the key reasons for affecting absolute and relative income mobility of urban residents; the interacting intensity is mostly determined by family workforce structure in the various regions; the reduction in tax burden increases absolute regional income mobility and reduces the upward probability of place when regional average family employed members are less than two, which are the opposite of the results when regional average family employed members are equal to or more than two. Secondly, absolute income mobility and upward probability of income place are less than ones in other provinces with higher proportion of deduction standard of individual income tax to family monthly income per capita. Thirdly, the reform of individual income tax has the significantly positive effect on the increase in absolute income mobility each year. In addition, the effects of the factors such as years of education, structure of income sources, industrial structure, and the degree of urbanization on income mobility present the characteristics of the stages and regional heterogeneity. It means that the tax system should give family and regional characteristics considerable prominence, focus on horizontal and vertical equity tax principle, promote the flow of residents' income between regions, lower income curing degree, and realize the dynamic equilibrium of income distribution.

Keywords

tax burden; income mobility; systematic dynamic panel GMM model; panel Logistic regression in order