A Study Of The Relationship Between The Financial Development And Urban-Rural Income Disparity In Sichuan Province

In the modern economy society, the financial industry takes an important part in the modern market economy. The financial development has a great influence on social economy life in various aspects, not only on wealth distribution, but also on economic growth. Since1978the reform and open policy, the financial industry has made the considerable progress, the economy has developed in high speed and people also have a higher living standard, but the income differential between the city and the rural has expanded increasingly which has a terrible influence on the development of the economy and the social stability. In a conclusion, it is emergent to shorten income differential between the city and the countryside.Everyone knows the territory of China is so vast. The different region has different development policy in economy."The western big development" plan which started in the "15" planning period gave the western area a great chance to develop their economy. It has a great practical meaning for the western area rising to research the relationship between middle area financial development and income differential. Therefore, this paper takes financial development and income differential of rural and city people as a study object.The research describes the theory of financial development, income distribution and the relationship between the two, and it explores in the mechanism of financial development on the urban-rural income gap. Combined the situation of Sichuan Province and based on threshold effects, non-equilibrium effects, poverty reduction effects of financial development, study three possible effects above the impact on the urban-rural income gap of Sichuan Province. Threshold effects and non-equilibrium effects can widening the income gap; poverty reduction effects can narrow the income gap. The paper analyses the situation about the financial development and the urban-rural income gap in detail. In the case of the financial development, the paper measures from three aspects of the financial development scale, efficiency and structure, which analyzing the problems in the financial development in Sichuan Province. In the case of the urban-rural income gap, the paper analyses the amount and source of income gap between urban and rural two group with the ratio about urban-rural percapita income and the Theil index, as an important indicator to measure urban-rural income gap. Combined with the rise of central China in the new situation, a comparative analysis of the urban-rural income gap between Sichuan Province.Based on the specifications and data from1979-2010analysis, financial development is divided into three aspects:the scale of financial development, the efficiency of financial development, the structure of financial development and add to economic growth, use VEC model on the relationship between financial development and the urban-rural income gap inspection. The model involves five variables:Sichuan Province’s financial scale, financial efficiency, financial structure, economic growth and urban-rural income gap. Its specific empirical research includes the stationary test, Johansen cointegration test.The results of the research of the VEC model shows that Sichuan Province’s financial development and the urban-rural income gap has a long-term stable relationship, the scale and economic growth have a positive impact on the urban-rural income gap,but the efficiency of the financial development and the income gap have the reverse relationship. The suggestions include curbing the outflow of rural financial resources, improving the efficiency of financial development, improving the rural financial system, changing urban-rural dual economic and financial structure,etc.