Abstract: Theoretically, there may be a nonlinear relationship between foreign capital economy and resident income gap. By applying the smooth transition regression model, this paper conducts a cointegration test of the threshold value over the relationship between foreign capital economy and resident income gap. The results show that there exits a cointegration relationship of threshold value between foreign capital economy and the national Gini coefficient. When the marketalization level is lower than 0.668, the positive role of foreign capital economy in enlarging the income gap reaches or is close to the maximum; when the marketlization level rises to 0.668, the effect of foreign capital economy on the income gap would have a nonlinear transfer. With the development of the marketalization process, the role of foreign capital economy played on China’s income gap changed its nature around 2000; during the period of 2002-2010, the role of foreign capital economy in narrowing the income gap may be close to or reach the maximum.

Key words: foreign capital economy; income gap of residents; nonlinear effect; cointegration of threshold value