Research On The Effects Of Financial Development In Hunan Province On The Income Gap Between Urban And Rural Areas

Since China’s reform and opening up, the economy of Hunanprovince has went through a sharp development, people’s living levelimproves greatly. However, behind the sharp development of economy,the income gap between urban and rural is expanding. The ratio of realdisposable income for urban residents and real disposable income forrural residents is expanding form1.79in1983to2.90in2011. This paperstudies the effects financial development have on the gap between urbanand rural through theoretical analysis and empirical study, and putforward the policy advise for how to narrow the gap between urban andrural. The study has an important practical significance on the economydevelopment of Hunan even of the whole country.Firstly, this paper establishes the theoretical analytical framework onhow the financial development effect income gap between urban andrural after reviewing the financial development and income gaptheoretical basement and establishes the framework of the theoreticalanalysis of the financial development and analysis the financialdevelopment of the income gap from three angles of labor wages,property income and investment income impact. On the basis oftheoretical analysis, firstly analysis the financial development andurban-rural income gap trends change of Hunan province, then analysisthe impact of the financial development of the urban-rural income gapfrom two aspects based on the actual situation in Hunan province. On thisbasis, according to the data of Hunan Province, this paper establishes the VAR model, and of study the relationship between the financialdevelopment and the urban and rural income gap of Hunan through anempirical study. The empirical results shows that, the expansion of thescale of financial development of Hunan will lead to a widening gapbetween urban and rural income, the efficiency of financial developmentis conducive to narrowing the income gap between urban and rural areas.Finally, put forward the corresponding policy recommendations tonarrow the income gap between urban and rural areas from the view offinancial development. Proposals include policy guidance to improve theallocation of financial resources imbalances and improve the ruralfinancial system in order to improve the efficiency of financialdevelopment, speeding up financial innovation to enhance the financingcapacity of rural residents.