An Empirical Study Of The Relationship Between Financial Development And Income Gap In China

Since China implemented reform and opening-up policy, financial industry has gained great progress, whose growing pace attracts worldwide attention.In terms of overall amount, the ratio of M2and GDP has reached a considerable heightln terms of structure, China has established a quite modern financial institutions system, which includes the central bank, commercial banks, policy banks, non-bank financial institutions and foreign financial institutions.Finance is core of modern economy, and financial development affects economic development in many aspects.At the same time, Chinese residents’income increases rapidly, level of whose happiness is supposed to raise.However, different groups get very different welfare from reform.As a hot social issue, income gap extends continuously, which seriously affected social stability and the healthy development of the economy.As a mean of allocation of resources, finance affects income distribution of residents in many ways.As a major aspect, there is close contact between financial development and economic growth, and the distribution of the fruits of economic growth affects residents income distribution directly.Unconventional events in the process of financial development, especially the financial crisis, which influences different groups with different degree, also changes the pattern of income distribution.In addition, because of the incomplete markets, different groups have so different capability of access to the financial services that they gain very different interests from financial development.These and others are all ways that financial development affect income distributions.Considering the disparity of urban and rural economic and financial development level, this paper respectively discusses the relationships of financial development and income gap within the town, and of financial development and income gap within the countryside.On the basis of the specific relationships, I try to make policy recommendations about how to promote finance industry to grow healthily and narrow resident income gap.According to the thinking, the contents of the article include the following sections.The first section involves writing background, introduction of the main content and review of related classic articles which are classified by conclusions.The second section summarizes the evolution of the theories of financial development and the ways that financial development affects income distribution.The part about ways mainly introduce the ways of financial crisis and economic growth.The third section describes the routing of Chinese financial development since reform and opening-up, current situation of Chinese financial industry and the present situation of residents income distribution.The forth section tries to find the relationship of financial development and inner urban income gap and the relationship of financial development and inner rural income gap through empirical testing.In this section, the author selects financial development indicators variables, income gap indicators variables and related control variables in the first place.Then the author builds a multiple regression equation about these variables and executes correlation analysis, co-integration test and Granger causality test, getting related results.The last section makes realistic meaning conclusions according to the empirical test results and makes policy recommendations in connection with the conclusions.In this study, considering financial development indices, the author chooses not only the total size of financial industry index, but also the efficiency of the financial system index.By searching and processing a large number of statistical data, the author gets the time sequence data of related indicators from1985to2011.The empirical test results indicate that there is long-term stable co-integration relationship between financial development and inner town income gap, and also between financial development and inner country income gap.That is why taking full account of the income distribution factors is meaningful when formulating financial development policies._...