Urban and rural residents' income gap is an important social problem, it not only directly related to the immediate interests of the broad masses of survival and development of rural residents, it also will seriously affect overall coordinated development between urban and rural areas, social stability. Eventually, it will affect our country to achieve common prosperity. This article uses Theil index to decompose the overall income gap in urban and rural in Beijing. It exposes that urban and rural income gap is still the most important factor of the overall income gap in urban and rural in Beijing. It process the data of the urban and rural residents' income from year 1990 to 2007 in Beijing and builds the ARMA Model. Moreover, it predicts the next eight years' urban and rural residents' income gaps and found that urban and rural residents' income gap will be widening. At the same time, the measurement model reveals that degree of dependence on foreign trade and investment, the difference of the fixed assets investment between urban and rural area have negative impacts on urban and rural residents' income gap, however the level of urbanization imposes a positive effect on it. At last, it gives some countermeasures to reduce urban and rural residents' income gap.
