The Study On Financial Impact On The Urban-rural Income Gap

Along with the economic development and the increasing income of Chinese people, the income gap between urban and rural residents is becoming larger from2.5in1997to3.13in2011, which has negatively affected the harmonious development of our country. In recent years, the relationship between financial development and urban-rural income gap has attracted lots of attention. In this dissertation, we study Central China as an example. By investigating the relationship between financial development and the urban-rural income gap, suggestions on the policy are proposed, which are both practical and significant for the economic development in the future.The paper includes five chapters. Chapter1reviews the domestic and foreign researches and introduces technical route and research method of the following thesis. Chapter2describes the status of the income gap between the urban and rural areas of China and analyzes the financial reasons of the income gap based the practical conditions. Chapter3theoretically investigates the relationship between financial development and urban-rural income gap on direct and indirect aspects, respectively. Chapter4is the empirical research part, in which the Central China region is studied as an example. We select six provinces including Shanxi, Anhui, Jiangxi, Henan, Hubei, Hunan as studied area, and determine how the financial development affects the urban-rural income gap from a quantitative point of view. In detail, the degree of financial development is measured by four indicators, which are financial scale, financial construction, financial efficiency and financial deepening. The data ranges from the years of1997to2011. The last chapter proposes policy recommendations of reducing the urban-rural income gap from financial development aspect based on the previous theoretical and empirical analysis.This dissertation considers that the financial development affects the income gap through threshold effect, industrial distribution and interest rate factor. Financial development can promote economic growth. If the elements are allocated reasonably, the economic growth will narrow the income gap, thus financial development will facilitate the distribution of income, and vice versa. Based on the empirical analysis, merely expanding the financial scale does not reduce regional income gap, but it is likely to expand instead. A more reasonable financial structure and higher financial efficiency will reduce income gap. And if there is obvious imbalance in urban and rural development, the increase in the degree of financial deepening will expand urban-rural income gap. In addition, the degree of financial development is not only affected by the impact of market development, but also a result of the impact of policies. And the development of the market influenced by the policy is large at this stage. Hence the policy in the urban-rural income distribution plays an important role.