The Empirical Study On The Influence Of Shandong Financial Development To Urban-rural Income Gap

The Third Plenary Session of the18thCentral Committee of the CommunistParty of China proposed that the focus of economic work in2014is the deepening ofeconomic reform, and the financial reform is undoubtedly the highlight of the reform.Although the total economic of Shandong is great, but the level of financial industryis not high. So, Shandong introduced22measures to deepen financial reforms, andthe effects of financial reform will improve the ability of financial services in the realeconomy, and benefit to the enterprises and the rural. Finance not only has thefunction of resource allocation also has the function of income distribution. In thecontext of the province’s financial reforms, and in the face of the widening incomegap, financial industry has to play a role of resource allocation and incomedistribution function simultaneously. If Shandong able to improve income distribution,while achieving financial province, its effect on the province’s financial reform willbe significance to our country.The objective of this article is to study the relationship between imperfectfinancial development and rural-urban income gap. Our object of study focuses onShandong Province, to solve two problems specifically: First, the impact ofnon-balanced financial development to income gap between urban and rural residents;Second, the financial development’s poverty reduction effect on the income gapbetween urban and rural residents. Therefore, there is a brief overview of the theory ofincome distribution and financial development, then this article tells us the situationof financial development and urban-rural income gap in Shandong Province. As toempirical studies the article uses panel data model to testing the impact of financialdevelopment on urban-rural income gap, and the empirical results show that thereexists an inverted U-shaped relationship between financial efficiency and urban-ruralincome gap, but the scale of development finance and urban-rural income gap doesnot exist in this relationship. Then the dissertation analyzes the effects of poverty reduction in rural financial development. The results of VAR model shows that along-term stability relationship exists between Shandong’s rural financialdevelopment and farmers’ income. However, the development of rural finance doesn’tnarrow the urban-rural income gap.The main conclusions from this thesis: Firstly, it needs to gradually reduce thefinancial duality, and balance the regional development of finance. Secondly, it isnecessary to create the equal financing environment and set up inclusive financialsystem, giving farmers more property rights. In addition, industrial restructuring,improving human capital and transferring of rural labor can help to narrow therural-urban income gap.