Study On The Influence Of Financial Development To Urban-Rural Income Gap

Since the reform and opening, the economic and finance of zhejiang province has developedrapidly and the financial indicators are ahead of the national average level. Along with the rapiddevelopment of the economic and finance, Urban-rural income gap of Zhejiang province alsogrows rapidly. Urban-rural income gap expand from1.65in1985to2.46in2009which reachedto the highest number of2.49in2006.This paper mainly studies the causes of the expansion of theurban-rural income gap of Zhejiang province from the angle of financial development and putforward some policy Suggestions for narrowing the income gap from the financial developmentpoint of view.This paper firstly establishes theoretical framework on the influences of the financialdevelopment to urban-rural income gap and combs related literatures about financial developmentand urban-rural income gap from two aspects of the theory research and empirical research.Thenwe analyze the reasons that the financial development influence urban-rural income gap.After thatwe make statistical description to the present situation of financial development and urban-ruralincome gap of Zhejiang province.Through the statistical description,we find that the indexes offinancial development in Zhejiang province is steadily rising and the index of urban-rural incomegap in Zhejiang province is in the twists to rise.At last,we make the empirical analysis by theStatistical data of1985to2009of Zhejiang province. Johansen cointegration test shows that thereexists a long-term and stable relationship between the financial development scale, financialdevelopment efficiency and the rural credit cooperative agriculture loan scale and urban-ruralincome gap.But there is a positive correlation between the scale of financial development andthere is a negative correlation between financial development efficiency, the rural creditcooperative agriculture loan scale and urban-rural income gap. Granger causality test show that:the increase of financial development scale is the cause of the widening urban-rural income gap.Based on the above analysis, We finally put forward three policy suggestions of developingrural finance, expanding financing channels for small and medium and speeding up the economicaldevelopment of backward areas to the financial development of Zhejiang province.