A Study On The Impact Of Financial Development On Urban - Rural Income Gap

This paper changes the traditional understanding of financial development. We take three indicators as a measure to measure the situation of the financial development, which is including the financial scale, the financial structure and these two mixing effects. Data on the financial development of the country’s 31 provinces and autonomous regions is utilized to study the income gap between urban and rural areas caused by the financial development. Panel data is applied in this paper. Fixed effects model, the random effects model, feasible generalized least squares method and other method are taken advantage of to study the influence practically. In other words, we cut it into three parts,namely the overall sub-regional and sub-categories financial development impact on the income gap between urban and rural areas. Consequently, we can fully understand the effect of the development of China’s financial impact on the income gap between urban and rural conditions. Innovation of this paper is:On the one hand, the financial scale and financial structure as an evaluation of two important indicators of the degree of financial development are cited into this paper; On the other hand, the introduction of the interaction term financial scale and financial structure, namely the mixed financial effect to analyze the income gap between urban influence the situation. The study finally comes into conclusion that:Firstly, expanding the scale and optimizing the financial structure for the mitigation of financial income gap has significantly negative effect. However, the financial effect for mixed urban-rural income inequality has a clear positive effect, which is actually a reflection of the country representation of the current financial development and the actual situation and is also demonstrating the incompatible problems in the financial development and economic development. Secondly, the degree of financial development of the eastern, central and western regions shows significant difference between urban and rural income gap. And it is also different to relief this situation. Lastly, the larger regional and smaller regional of financial scale have difference to decrease the income gap for ease of focus vary, one depends on the financial scale, the other is financial structure.