The Research About The Rural Financial Development And The Urban-rural Income Gaps

Since China’s reforming and opening up, with the reforming of whole economysystem that includes the reforming of income distribution system and themarket-orient economy, the income gaps among Chinese residents are growing.Among the gaps, the most prominent problem is the income gaps issues between theurban and the rural. From the perspective of the absolute difference in per capitaincome, in1978, China’s urban residents’ per capita disposable income and rural percapita net income were343.4yuan and133.6yuan. That means the per capita incomedifference is209.8yuan. In2011, they reached21,809.8yuan and6,977.3yuan, percapita income expanded to14,832.5yuan. From the perspective of the urban-ruralincome ratio, it expanded from2.57times in1978to3.13times in2011. If takingaccount of the variety of the medical assurance, the social insurance, the education,the subsidies and other hidden income urban residents enjoy, coupled with thededuction of the agricultural reproduction costs from the rural residents’ net income,the income gap between China’s urban and rural areas should be much larger than theabove figures. Rural finance plays a vital role in rural economic development of ourcountry as the core of modern rural economy. So it affects the income gap betweenurban and rural areas. Based on this reason, it is necessary to research the income gapbetween urban and rural areas from the perspective of the rural finance developments.Firstly, the article analyzed the current situation of China’s rural financialdevelopment and the urban-rural income gap. Then from a theoretical perspective, thearticle analyzed the mechanisms how the development of rural financial affects theincome gap between urban and rural areas. The article thought that the rural financedevelopment narrowed the income gap between urban and rural areas through the"poverty reduction effect", and expanded the urban-rural income gap through the"threshold effect" and the "non-equilibrium effects". Then, based on the framework ofurban-rural dual economic structure, the article thought that the rural financedevelopment expanded the income gap between urban and rural areas through theestablishment of a mathematical model. And based on the provincial panel data from 1997to2011, using the fixed effects panel model and the DIF-GMM, the SYS-GMM,this article conducted a combining static and dynamic econometric analysis on therelationship between the rural financial development and the urban-rural income gap.The results showed that: in the case of controlling for other variables, both the sizeand the efficiency of the rural financial development are positively correlated with theincome gap between urban and rural areas. That means the rural finance developmentexpanded the income gap between urban and rural areas. And targetedrecommendations put forward corresponding countermeasures. And targetedrecommendations and the corresponding countermeasures are put forward.