Abstract:Based on Simultaneous Equation Model of county urbanization and urban-rural income gap,this paper uses the panel data of 1 523 Counties (Cities) from 2005 to 2010 as well as methods of 2SLS and 3SLS so as to empirically test the relationships between these two variables.The result shows that there is a positive interaction between them.Additionally,improving the development of the economy and finance of counties areas and the proportion of tertiary industry are the effective ways to narrow the gap of urban-rural income and enhance the level of county urbanization.Therefore,this paper proposes some suggestions on how to push forward the urbanization and narrow the urban-rural income gap,such as readjusting the industrial structure,improving the local non-farm employment of farmers,utilizing the diffusion effect of central towns in counties areas and increasing the financial support for rural areas.