A Study On The Relationship Between The Financial Development And Urban-rural Income Gap

Since the reform and open polity, China has achieved rapid economic growth,Financial sector has made considerable development and per capita income increased.At the same time, the widening income gap between urban and rural areas has becomea socially sensitive topics.Income distribution issues are also a problem that attracts the attention of allpeople, the distribution of income status, not only affect the speed and efficiency ofeconomic development, but also affects the vital interests of the people, affectingsocial harmony and stability. Many scholars have conducted a decomposition of thedistribution of income and found that urban-rural income disparity on the contributionof income distribution reached40%-60%. The gap between urban and rural areascaused by many reasons, such as the evolution of economic development.In recentyears, some scholars study the relationship of them from the perspective of financial.However, there views are different. Based on previous excellent experience, usingthreshold regression model, this paper tests whether financial development and urban-rural income gap exists the non-linear relationship. If there is non-linear relationship,I will further analysis which nonlinear relationship they are.First, I analyse the way that financial impacts the income gap.Secondly, I descript the present situation of financial development and urban-rural income gap. Overall, the scale of financial development is in the rise, while theEfficiency of financial development has been in a downward trend. The income gapbetween urban and rural areas is divided for four stages according to their volatilitytrend.Again, I made a empirical test of financial development and income gap betweenurban and rural areas. The empirical results shows that there is a single thresholdnonlinear relationship between the scale of financial development and urban-ruralincome gap. the larger of the financial development in the region, the stronger it willpromote.Finally, from the perspective of financial development, I propose some policyrecommendations that can narrow the income gap.