Research On Financial Development And Urban-rural Income Inequality Based On Dynamic Panel Model

The thesis mainly studies the relationship between financial development and urban-rural income inequality. Firstly, previous theories, opinions and study results about the relationship between financial development and income inequality are reviewed and summarized. Secondly the ways in which finances influence urban-rural income inequality are analyzed theoretically. We believe that the influence is shown in three ways:finance development influence income through the dual structure of economy, the threshold effect and reducing poverty effect. Through the analysis of the situation and trend of the relationship between Chinese financial development and urban-rural income inequality we discover that the level of urban-rural income inequality is closely related to a country’s financial policy, which influences the trend of it. However, in recent years, government policy seems to have exerted little influence on the trend of urban-rural income inequality, which has not been reduced because of the positive policy. After meticulous study and analysis of financial development in China, I discover the uniqueness of our finance. State owned banking system plays a key role in financial system and indirect financing is absolutely the main part of our financial system. Compared with bank, the development of stock and insurance is still at the early stage. Despite the rapid development and expansion of bank-based finance, financial resources are mainly allocated in cities. As a result, the sever unbalance finical resource allocation is probably the reason of the increasing large urban-rural income disparity.In the experiment part, provincial panel data from1978to2010are adopted to test the relationship between financial development and urban-rural income inequality. Results show a positive correlation between them. Afterwards, the samples are divided into three groups according to their financial development levels. The experiment results of those three groups prove the correctness of the previous result. However, under different economic development conditions, the influence of financial development is distinctively different. The higher the economic development level is the weaker influence it has, which seems to prove that its influence on urban-rural income inequality related to the general level of economic development. Finally, the reason why Chinese financial development enlarges urban-rural income inequality is analyzed and relevant advice is put forward from the perspective of financial development.