Financial Institution Arrangement And Urban-Rural Dual Economy Transfer In Economic Transition

China is a typical urban-rural dual economy. Although the market-oriented economic reform has been carried out for more than 20 years in China, the urban-rural dual economy has not been alleviated, reversely , it shows an increasingly deteriorated trend.In this paper, us systematically investigate the financial factors behind the urban-rural dual economy's evolvement since 1978, and find that, the financial institution arrangement is endogenously originate from China's special transition route, and it's an imposed institution arrangement by government for giving interest compensation to interest groups. So, under such an endogenous financial institution, financial resources'allocation is provide with strongly government's preferences and result in the SOE and urban preferences of financial resources'allocation. On the other hand, even excluding government's preference of financial resources'allocation, some endogenous characters of this endogenous financial institution arrangement, including interest rate restrain, monopoly bank structure, and rural financial repression, would result in urban preference of financial resources'allocation and rural financial resources'outflows.The urban preference of financial resources'allocation and rural financial resources'outflows would act on the capital accumulation, creating employment in urban , and result in rural credit restrain, et al, to affect urban-rural dual economy. And us put forward theoretical hypothesis based on theoretical analysis and test those theoretical hypothesis, using provincial panel data from 1996 to 2004 and applying first difference GMM and System GMM techniques, and find that the expansion of financial loads is cumbering rural labors'transfer and enlarging the disparity of urban-rural labor productivity. So, the conclusion of this paper is that, financial institution arrangement is alleviating urban-rural dual economy in China.The conclusion of this paper has importantly policy meanings for the market-oriented reform of financial institutions and reducing urban-rural economic disparity. And at the end, us put forward some respective policy meanings.