A Study Of The Relationship Between The Financial Development And Urban-Rural Income Disparity In Shandong Province

Since the reform and opening up, Shandong province achieved rapid economic development, and the residents living standards have increased significantly; however, behind the economic development, the urban-rural income gap is expanding. In 2009, the ratio between actual average disposable income of urban residents and rural real income from 1.49 in 1983 expanded to 2.91 in Shandong province. It has important practical significance for economic development of Shandong and the whole country that a research is made on the issue of Shandong urban-rural gap, which distinguishes between overall financial development and rural financial development of Shandong province, and promotes some policy recommendations to narrow the income gap from the aspects of financial development.Firstly, an initial analytical framework is established on the impact of financial development to the urban-rural income gap, which proposed three effects of financial development to urban-rural income gap. On the basis of theoretical analysis, first of all, based on present situation of Shandong province, we analyze the trend and present situation of overall financial development, rural financial development and urban-rural income gap, also analyze the influence of financial to urban-rural income gap from four aspects. On this basis, using of data of Shandong province, a VAR model is established to make the empirical test among overall financial development, rural financial development and urban-rural income gap. Finally, policy suggestions are proposed to narrow urban-rural income gap from the prospective of financial development. The suggestions include curbing the outflow of rural financial resources, improving the efficiency of financial development, improving the rural financial system, changing urban-rural dual economic and financial structure, etc.