The Influence Of Financial Development On The Urban-rural Income Gap Under The Background Of Urbanization

Economy has developed fast and people’s life has been greatly improved since 1978. However, urban and rural duality situation still exists and urban-rural gap is bigger and bigger behind the high economic growth. As one of the most important variable in the economic growth to deal with urban-rural gap, financial development has attracted lots of concern. The purpose of this paper to discuss the influence of financial development on the urban-rural income gap under the background of urbanization is to summarize the present situation of urban and rural financial development, explore the influence of financial development on the urban-rural income gap and give suggestions for carrying forward urbanization and the structure of the credit policy, and solve the problem of urban-rural gap.In order to do the study, three transmission mechanisms:poverty reduction effect, non-equilibrium effect and the threshold effect were used. Besides, time series data from 1980 to 2014, provincial panel data from 2002 to 2014, and the co-integration test, the error correction model, the fixed effect model with variable coefficients and threshold models were also used. The empirical results show that now in China, the financial development is not complete, so non-equilibrium effect and threshold effect have great influence. Poverty reduction effect cannot lessen urban-rural income gap, and financial and urbanization amplifies it. And based on the results, this paper gives policy recommendations to expand rural credit, pay attention to the essence of urbanization, solve the problem of dual structure and improve the overall level of financial development.