Empirical Study On The Relationship Between The Financial Development And Urban-Rural Income Gap

Since the reform and open policy, China has achieved rapid economic growth, the average annual GDP growth rate keeps the rapid of around 10%, the distribution available for people is bigger and bigger, but how to make the "cake" a fair distribution attracts social concern. Finance is the core of the modern market economy, the configuration of the social capital has an important effect on the income distribution. Financial crisis which happened in the United States in 2008 hit the global economy which makes us realize the importance of financial development. Therefore, in the context of building a socialist harmonious society, it has important practical significance of researching the urban-rural income gap from the perspective of financial development and raising the corresponding policy recommendations.Home and abroad scholars focus on income Distribution problem for a long time. Scholars from many different angles such as economic development, industrial structure, political system, and so on to research urban-rural income gap, and have made great achievements. However, there are few scholars from the perspective o financial development to research the rural-urban income gap.China began in 2004, up to now there is less than a decade. Summarize the existing literature, foreign scholars usually use cross-national data to study. However, there are many defects in the cross-country data:for example cross-country data always causes sample bias, which does not consider the characteristics of each country. China is a large country, which has large population and the rural population is a large proportion in total population, uneven distribution of urban and rural areas, etc., cross-study results are applicable to our country or not is also worth further exploration. Domestic scholars mainly applicable national or provincial time series data, and choose little control variable. This paper is based on the experience of domestic and foreign scholars, and selected panel data of years from 1978 to 2010 in 31 provinces, and added to economic development, industrial structure, urbanization, financial systems, education and other control targets into the development of the relationship between income inequality and description.First, based on reviewing the previous literature of the income gap and financial development, this paper describes the historical conditions of the financial development and the income gap between urban and rural since reform and opening.In general, Chinese urban-rural income gap, although the forward wave, but the overall trend on the show has expanded each year. Decomposition by Theil index, we also found that the proportion of income gap between urban and rural areas in the urban-rural income gap is increasing; As a modern market economy core, although since reform and opening up financial has made rapid progress, financial assets gradually increasing, the financial system is perfect, however, the financial structure of our country still should be adjusted, urban and rural financial resources don't balance is restricted the development of our country's financial. Urban-rural imbalance of financial resources is hampered China's financial development.Secondly, the paper from the economic growth, threshold effect, inflation and financial crisis three aspects of financial development of the influence of income gap way.Again, this paper do empirical study on the relationship between the financial development and urban-rural income gap.This article uses the Theil index as an indicator to measure urban-rural income gap, and uses the unit root test and cointegration test methods to search the relationship between financial development and urban-rural income gap, empirical results show that t the relationship between financial development and urban-rural income gap has a cointegrating relationship. And then establish a fixed effects model, and combined with kuznets curve into the development of our country's income gap between urban and rural area and the situation analysis, this article will divide sample period into three periods:1978-1991,1992-2010,1978-2010. The study found that the first phase of our country into the development and the income gap is positive relation, mainly because of the financial system in this stage in countries under half of monopoly, large and medium-sized state-owned enterprises, urban construction, and more support for rural financial financing opportunities less, urban and rural financial imbalance in the development of the income distribution restricted the fair. Two stage after in our financial development and the income gap present kuznets watts fall "u".Finally, the paper made from a financial point of view to narrow the income gap:First, improve financial markets, build a market-oriented, and efficient financial system; Second, improve the capital market, to develop non-bank financial institutions; Third, concern the "three rural" issue; Fourth, the development of rural finance.