An Analysis About The Impact Of Chinese Financial Development On The Urban-rural Income Gap

All the aspects of our country has achieved splendid progress in the past30years sincethe reform and openness to the world in1978.It is amazing to the world that the economyof China got the speed of growth in nearly double digit rates of hundred percents. Theachievement is remarkable without doubt under the strategic architecture that the mainemphasis transformed from rural to urbanization and industrialization and that transitionfrom planning economy to market economy. However, the rapid development did not leadto the equitable distribution of income, on the contrary, the gap between urban and ruralhas gotten divided day by day under the privative structure.The unequal incomedistribution brought about the accumulation of the social contradictions and affect thesocial accord development. It is a threat to the sound development of economy and publicstability. So base on that, this paper attempt to discuss the effects to the gap from theperspective of financial development. Coming across the phase of financial deepening, itis significant to probe into the factors and mechanism that affect the inequality.The current situation has indicated that the promotion of the financial develop patternsto the economy does not mean the financial development can reduce the income inequality.So firstly, it is important to clear up the situation of Chinese gap on the whole. Then wetest and verify the Kuznets Effect in China through panel data. The result shows that it hasno abundant proof to indicate the law of Kuznets Effect is accord to China.Secondly, through the import of the financial perspective, this article takes thetheoretical analysis for the mechanism of financial development to the income inequality.Combined with the empirical test, we can explore the influence of financial developmenttowards the inequality with the method of individual fixed effect estimation in static anddynamic situation. Finally we can get the accordant conclusion through either thetheoretical analysis or the empirical test. Namely, the expansion of the financial scale strengthen the gap of the income, the disequilibrium financial development patterns withthe urban incline lead to the inefficiency of resource allocation, this is the important factorthat can not change the income distribution structure. We need to establish multitudinousfinancial market that with fully competition, deepen the reform of financial fundamentallyand lead the reasonable allocation of capital, bring down the transaction cost and thresholdeffect of financial market. Only by doing so can we make a contribution to the equitabledistribution of income between the urban and rural.