The Level And Economic Welfare Effects Of Rural Financial Services In China

The positive mutual promoted relationship between financial development and economic growth has been confirmed by both domestic and foreign empirical research. However, the issue about economic welfare effects of financial development is controversial. The reason is that the dimension of financial services is ignored. As an important indicator of financial development, the upgrading of the level of financial services can promote economic growth, however, whether it is able to promote micro-economic welfare of the individual at the same time? In particular, whether the level of rural financial services has been significantly improved in China since a new round of reform of the rural financial? Whether it is able to promote the economic welfare of rural residents? The answers to the questions can reflect the effects of "the New Deal of Rural Financial" to a certain extent.This paper presents a basic hypothesis that to enhance the level of rural financial services can contribute to the economic welfare of rural residents. We prove the causal interactive relationship between financial services and economic welfare at the theoretical level, and then do an empirical test of a provincial panel data from2006to2010. In order to further illustrate the visual effect of financial services on promoting the economic welfare, the paper analyzes a typical case of Honghu city in Hubei Province. Basic research content and conclusions are as follows:First of all, the paper explores the theoretical interaction mechanism between financial services and economic welfare. Through an overview of the relevant literature, we select indicators of economic welfare of rural residents which can be measured, and learn from the analysis paradigm of impact path about financial development and economic growth to resolve the relationship between the rural financial services and economic welfare. The result shows that there is an interactive impact mechanism between them.Secondly, the paper evaluates the level of rural financial services from2006to2010in China. Analytical Hierarchy Process (AHP) is adopted and the results show that the level of rural financial services of each province in China differs significantly, and the overall level of rural financial services in China is not high which needs to be further enhanced.Then, the paper makes an empirical test on the basis of building a comprehensive index of the economic welfare of rural residents. IFI multi-dimensional index construction method is used to measure the level of economic welfare of rural residents in China from2006to2010. On the basis of it, we establish a dynamic panel data model which is based on Bergson-Samuel-son Social Welfare Function to estimate the impact of China’s rural financial services on the economic welfare, which is the ultimate goal of the paper. The results show that:The upgrading of the level of rural financial services in China have a positive influence on the economic welfare of rural residents; the network infrastructure construction, loan services and insurance services of rural financial services have a positive influence on the economic welfare.Finally, in order to show the intuitive relationship between the financial services and economic welfare, the paper selects Honghu city in Hubei Province as a typical case. This case is a simple interpretation and confirmation of the theoretical analysis and empirical test in this paper. Based on the above studies, we believe that the policy effects of China’s rural financial reform is emerging but also needs to be strengthened in the future; Increasing the supply of rural financial services and improving the overall level of rural financial services is an important way to promote the economic welfare of rural residents in China.