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Grey Incidence Relation Analysis and Granger Causality
Tests of the Income Level and Economic Growth – Case
study on Gansu province, China
1
Xingpeng Chen,
Jing Wang, Weiwei Zhang, Bing Xue,
Xiaojia Guo
College of Earth and Environmental Sciences Lanzhou University, Lanzhou (730000)
E-mail:xuebing.china@yahoo.com.cn
Abstract
Based on the data of GDP, Per Capita Annual Disposable Income of Urban Households (PCAD),
and Per Capita Annual Net Income of Rural Households (PCAN) of Gansu province from 1978 to
2007, this paper analyzed the relationship and causality of the PCAD and PCAN to GDP by using
the methodologies called Grey Incidence Relation and Granger Causality Tests. The outcomes
show that: the incidences relation of PCAD and PCAN to GDP are prominent, and the trend of the
prominent concerning PCAD to GDP is climbing; the PCAD and PCAN are the Granger causality
to GDP, which means the GDP could increase 0.7337% unit due to the 1% unit increase of PCAN,
instead, the GDP only could increase 0.4817 % unit due to the 1% unit increase of PCAD.
Keywords:Grey Incidence Relation;Granger Causality Test;Income Level;Economic Growth;
Gansu Province
1. Introduction
In the theory of regional economic development theory, one of the topics is to clarify the
relationship between the per capita income and the regional economic development
[1-4]
, some
scientists thought that the consumption payout of the households is the driving force of the regional
economic development, and instead
[2, 3]
, some others thought that the relation between the per
capital income and regional development is interaction
[5-7]
. This research takes the Gansu province
of China as a sample, by choosing the indices from 1978 to 2007, and based on the methodology
called Grey Incidence Relation Analysis (ab. GRA), Granger Causality Test (ab. GCT), to study the
incidence relation of the per capita annual disposable income of urban households (ab. PCAD), and
per capita annual net income of rural households (ab. PCAN) to regional gross domestic product (ab.
GDP), and clarify the causality of the PCAD’s growth to GDP growth, as well as the PCAN’s to
GDP’s.
2. Research Area and Indices Chosen
2.1 Research Area
The research area in this study is Gansu province, China, which located at 92.13-108.46 E and
32.31-42.57 N. The landforms in Gansu are complicated and varied. There are 450 rivers in Gansu,
among which 78 rivers have a yearly runoff of over 100 million cubic meters each. Gansu has a dry
climate with plenty of sunshine, strong radiation and the temperature varies greatly from day to
night. The annual average temperature is between 0℃-14 dropping from the℃ southeast to the
northwest.
Gansu has been a multi-ethnic province since ancient times. Among its total population of 26
million, the minority population takes up 2.199 million. With non-ferrous metals, energy,
petrochemicals, machinery and electronics, building materials, food and textile as its mainstay,
Gansu has a relatively reasonable and complete industrial system. Although modern industry
appeared laggardly and had a weak fundament, nowadays it develops fast.
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Support by the National Natural Science Foundation of China, the project No. is 40871061.
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