A Study On Influence Mechanism Of Inclusive Financial Development On Urban-Rural Income Inequality

The imbalance of income distribution has been the concern of scholars,it will not only lead to a decline in consumer demand,but will increase the risk of a country falling into the middle income trap as well.The Third Plenary Session of the 18th CPC Central Committee points that we need to increase the income of poor people,to expand the proportion of middle-income eamers,to narrow the income gap between urban and rural areas,and gradually form olive distribution pattern.However,in accordance with the ration of urban resident income to rural resident income,the current urban-rural income gap in our country is still more than three times.Since 2005,the academic and policy circles have realized that developing inclusive finance can not only expand the extensiveness of financial services,but also provide affordable diversified financial products,which play the irreplaceable key role in raising rural income and narrowing the income gap between urban and rural residents.Therefore,the dissertation studies the direct and indirect conduction mechanism of inclusive financial development on the income gap between urban and rural residents.On the basis of theoretical and empirical analysis,the dissertation builds inclusive finance policy framework to narrow income gap between urban and rural residents.The dissertation mainly discusses four issues:Firstly,how to choose index to measure inclusive financial development?Secondly,what is the direct influence mechanism of inclusive financial development on urban-rural income inequality?Third,what is the indirect influence mechanism of inclusive financial development on urban-rural income inequality?Fourth,how to develop inclusive finance,and how to narrow the income gap between urban and rural residents income?The first issue is the basis of the whole study.Based on that,the second and third issues discuss the influence mechanism of inclusive financial development on urban-rural income inequality.The fourth issue is the purpose of the whole study.Firstly,based on the related literature,the dissertation constructs inclusive financial development index system in line with China's characteristics using coefficient of variation method and the method constructing HDI.The index system includes four dimensions and fifteen index.The four dimensions are finance penetration,availability of finance,finance usage and the cost of financial service.Secondly,drawing on existing research,assuming that total factor productivity is endogenous variable,the dissertation constructs a dual economic growth model,which includes the production sector,the financial sector,and several important variables,such as the development of inclusive finance,human capital,labor force.It shows that with the development of inclusive finance,enterprise's total factor productivity increases,which promotes workers in unskilled sector to earn higher salary;On the basis of theoretical analysis,the dissertation uses panel data fixed effect model,random effect model,GMM model to do the empirical tests.The results show that the increase of inclusive finance,the increase of human capital and the increase of labor transfer to urban are contributive to narrowing the income gap between urban and rural residents.Third,following overlapping generations model,the dissertation analyzes the indirect mechanism of the influence of inclusive financial development on urban-rural income inequality which are human capital conduction mechanism and labor transfer conduction mechanism;On the basis of theoretical analysis,the empirical analysis results show that he influence of inclusive financial development on rural resident human capital and the labor force transfer to urban areas are significantly positive.The fourth issue is the summary and sublimation of the first three issues.It is concluded that inclusive financial development plays a positive role in improving total factor productivity,enhancing human capital of rural residents and promoting rural labor transfer.These effects are achieved through financial availability,financial usage,and the cost of financial services.To promote the influence mechanism to run more smoothly,we need to expand financial access,increase financial usage and decrease the cost of financial service.Therefore,based on the theoretical and empirical analysis results,combined with China's reality,the dissertation builds inclusive finance system from three levels which are the macro-financial system reform level,the financial and non-financial institutions level,and the micro-financial product level to enhance self-development capacity of rural residents and narrow the income gap between urban and rural residents.The specific policies include improving credit guarantee system,accelerating the transformation of traditional financial institutions,promoting the development of new financial format.By the implementation of the macro policy and the micro product design,the inclusive financial system in China will be improved,which can help to improve the capacity of rural residents' self-development,and ultimately to narrow the income gap between urban and rural residents.However,there are flaws in both theoretic and empirical study.With the emergence of new financial formats,the deepening reform of the financial system,the dissertation needs.to take the function of Internet banking and microfinance into consideration which is the future research direction.