Re-examining the Relationship Between Income Inequality and Economic Growth Under the Perspective of Dual Circulations

This paper discusses the relationship between income gap, domestic consumption demand and economic growth under the development pattern of ″inner economic cycle as a leading role″. First, it matches a set of high-quality international data on income inequality, and verifies the reliability of matching inequality data using the classical model. Then, it theoretically analyzes the influence path of ″income inequality-domestic consumption demand- economic growth″ under the development model of ″outer cycle″ and ″ inner cycle″. Finally, it introduces the variables of domestic consumption demand into the classical model, and carries on the empirical analysis using system GMM method. Results show: (1) the deterioration of income inequality and the decline of domestic demand consumption share occur at same time, it will promote economic growth under the economic development model dominated by ″outer cycle″; (2) the improvement of income inequality and the rise of domestic demand consumption share occur at same time, it will promote economic growth under the economic development model dominated by ″inner cycle义″. In the new stage of development, it is necessary to deepen the reform of income distribution, narrow the income gap, enhance the consumption ability and willingness of the residents, and finally realize the transformation of economic growth pattern to the ″inner economic cycle as a leading role″.