Empirical Research Of Relationship Between Financial Development And The Civil Income Gap

The study of economic growth, income distribution and the gap between urban and rural areas has always been the focus of social concern, especially the study of income gap between the urban and rural residents. Foreign scholars began to focus on the relationship between financial development and income distribution since1990s. In our country, the scholars began to study the income gap between urban and rural residents based on the perspective of financial development in2003.This paper analyzes the impact of financial development on the income gap between urban and rural residents through the theoretical analysis. And I believe that the financial development influences the income gap through three aspects as the following:the various threshold effects; direct and indirect influence; the unbalanced development between regions, the urban and rural areas. This paper measures the income gap between urban and rural residents by using the traditional measurement methods, describes its development. And further, the paper does the kernel density estimation by using the data from some micro surveys, gives the measurement of the dynamic evolution process and the trend of the income gap between urban and rural residents. At the last, this paper briefly summarizes the three traditional financial industries-bank, security and insurance, describes the financial development’ scale and efficiency through the deposits and loans in financial institutions from1978to2012.Panel data is a2-dimensional data, it’s the superposition of time series data and cross-section data. Due to the differences of the financial development in different regions of our country, this paper uses panel data that include30provinces, municipalities and autonomous regions to study the relationship of financial development, urbanization and income gap between urban and rural residents in35years. It is confirmed that there is a long-term stable equilibrium relationship between them,through the unit root test and the cointegration test in the panel data. The paper establishes four panel data models of the national, eastern, central and western areas. The results of these models show that the scale of financial development and the income gap have a strong positive correlation in all regions, but the relevance degree is differential in different regions. In the eastern and central, the efficiency of financial development can narrow the income gap between urban and rural areas, but in the western area, they are negative correlation. And urbanization is the main reason that affects the income gap between urban and rural residents, the influence is obviously different.According to the results of the panel data models, the relationship between financial development and the income gap between urban and rural areas does not belong to any kind of four existing research conclusions, it’s the new kind of relationship. The western region’s financial development is still in the initial stage, the central region’s financial development is on the rise, and the financial development of eastern region is relatively in the mature stage. With the development of finance, the pull effect of financial development scale is in a rising trend, when the financial development reach the eastern area’s degree, the pull effect is reduced. That is the pull effect of financial development scale on income gap between urban and rural residents is inverted U-shaped. But in the overall national level, financial development scale is widening income gap between urban and rural residents, it did not confirm whether the existence of inflection point or when will the inflection point occur.