Effects Of Chinese Financial Development On The Income Gap Between Urban And Rural Residents

Since1978, China’s financial industry has developed rapidly,which outstandingperformed for total assets continued to increase.Meanwhile, the financial efficiency alsoimproved and it improved the living standards of the people.However, financialdevelopment on the other hand also caused polarization between rich and poor. Incomedistribution gap between urban and rural residents was widened.Therefore, research on theimpact of China’s financial development to the income gap between urban and ruralresidents, and analysis of financial development pathways which narrow the income gap,the rational allocation of financial resources,becoming the promoter of improving incomedistribution,are significant for building a moderately prosperous society.Theorists at home and abroad have been a lot of theoretical and empirical analysisonfinancial development influence to income gap.Roughly divided into threeconclusions:financial development and the income gap exists Kuznets inverted "U"relationship, between financial development and income gap exists expansion, financialdevelopment reduces the income gap.Due to historical reasons, the financial developmentof China’s income gap exists on the threshold effects,three non-equilibrium effects andresults in a "financial repression". In addition, this paper analyzes the status quo of China’sfinancial development and urban-rural income gap and uses Sundrum (1990) proposedgrouping weighted method to calculate the national residents Gini coefficient.In the empirical analysis, the level of financial development indicators selected in thispaper, covering both indicators of financial depth (the scale of financial development), butalso includes financial efficiency, financial structure indicators. Firstly, use ADF unit roottest to determine whether a variable is smooth and single whole order, and establish VARmodel, using co-integration test method to determine the impact of financial developmentand other control variables on the income gap in China. Secondly, establish VEC model,and use Granger causality test method to test the causal relationship between financialdevelopment variables and the income gap. The final, use impulse response functions andvariance decomposition to make for further discussion to moving images and the degree ofinfluence between variables.Empirical analysis shows that in the long run, the financial scale of the expansion willincrease the national Gini coefficient of urban and rural residents and has expanded theincome gap between urban and rural residents.It mainly because of our extremely serious financial repression. Financial efficiency will reduce the Gini coefficient of income of thecountry, and narrow the income gap between urban and rural areas. This reflects theeffect of financial development on poverty reduction in the income distribution. Improvethe financial structure of the country will reduce the Gini coefficient of urban and ruralresidentsand widen the income gap between urban and rural residents. In the short term,China’s financial development scale, efficiency, structure and economic growth to nationalGini coefficient, the impact of urban-rural income gap will always deviate from thelong-run equilibrium, as the relationship between value and price. Therefore, there is apositive effect of financial development on narrowing the income gap, China’s income gapnarrowing financial development as an important goal shouldn’t be shaken. In themoderate financial scale development of China’s financial development, conduct in-depthefficiency improving and restructuring is of significance.