Financial Development And The Western Region The Income Gap Between Empirical Research

The issue, on whether financial development contributes to reducing gap of wealth and realizing social harmony and stability, has not attracted enough attention of economists. Since the 1990s, especially in recent years, the study concerning the relation of financial development and income gaps has increasingly become the focus.The paper is, on the basis of the multidimensional interpretation of financial development and income gap, to explore the relation between financial development and income difference, centering on the interactive transmission mechanism, with combination of financial development history and present income difference of western regions; to bring empirical test into the relation between financial development and income difference of western regions in China from 1993 to 2009, by establishing a comprehensive system to evaluate the level of financial development and income difference of western regions. Results indicates that, there exists long-term steady relation between financial scale, efficiency, structure and income gap in western areas, with the positive-correlation of financial scale and income gap and the negative-correlation of financial efficiency and structure. That is, financial scale expansion enlarges income gap, while financial efficiency development and structure improvement reduces income gap. Meanwhile, the paper is, with a cross-section analysis of 1995 and 2009, to analyze what causes income difference of western regions most and discusses what the effect tendency is, give the conclusion that financial efficiency development and structure lead to growing income disparities, by contrast financial scale increases Gini Coefficient and decreases income difference between urban and rural areas.Based on the empirical results, the paper puts forward five policy recommendations for narrowing income difference of western regions from the perspective of financial development, it includes:to strengthen financial support for underdeveloped areas and institutions in the process of widening scale; to give full play to financial institutions and improve financial legal environment so as to enhance financial efficiency and quality; to structure multiple financial system for increasing the amount of direct financing scale; to promote rural finance and integrated urban and rural development; and to implement financing support policies.