Abstract: In the situation of China’s Urban and rural factor market being artificially divided, the movements of labor, land, capital and other factors between urban and rural areas are restricted. Such incorrect allocation of factors leads to lower allocation efficiency, which makes the internal mechanism of economic convergence between urban and rural areas unable to play a role. By selecting certain statistical indicators to decompose China’s urban-rural income factors from 1990 to 2011, this paper uses the combination of qualitative and quantitative methods to analyze the impact of factor market allocation on the income gap between urban and rural residents. According to the research, the factors of land and labor have the greatest impact on urban-rural income gap. Therefore, some countermeasures should be taken to narrow the income gap between urban and rural residents, such as improving factor market allocation system, promoting the rational allocation of labor, land, capital and other factors, improving the government’s macro-control functions, etc.

Key words: factor market; allocation; income gap between urban and rural residents; regression analysis