Abstract: Narrowing the income gap between urban and rural areas and expanding the rural consumption is an important goal of urbanization. Since the past 30 years, China has achieved rapid urbanization development with the widened urban-rural consumption gap. Based on the theoretical analysis of mechanism of urbanization’s impact on consumption, this paper uses China’s provincial panel data from 2002 to 2015, employs PVAR model empirically study the effect of urbanization development to the synchronous growth of urban and rural consumption, and has found that China’s urbanization development with “city priority” distort the synchronous growth of urban and rural consumption, through rising urban residents’income level, strengthening rural residents precautionary savings motive and leading the welfare loss of agricultural transfer population. The further study with PSTR model shows that effects of urbanization to urban and rural consumption related to income shows relatively flat “S” type, the “threshold” of urban and rural is 7778 and 5367 yuan respectively, but the time which rural reached the “threshold” is longer.

Key words: Urbanization   Urban-rural Gap   Consumption   PVAR model   PSTR model