The Empirical Study Of Impact Of Financial Development On The Urban-rural Income Gap In Fujian Province

The income gap between urban and rural areas reflects a country’s fairness level of social income distribution. The over-large gap is not conducive to the development of economy and the social stability. There are a lot of researches on the income gap between urban and rural area, but the research done from the perspective of financial development is rare. As the finance plays an important role in economic and social development, studying the effect of financial development on the income gap between urban and rural areas is of great significance to narrow down the income gap. Fujian Province has achieved great economic development in recent years, but the income gap between urban and rural areas has also gradually expanded. And it hinders the sustainable development of Fujian province. This paper takes fujian province as the research object to explore the relationship between financial development and urban-rural income gap.The article firstly introduces the theory of financial development and urban-rural income gap. analyses the relationship between the two theories and proposes the mechanism of the effects of financial development on the urban-rural income gap. Secondly present the situation of the urban-rural income gap and the financial development in fujian province from different aspects. Then analyze the effects of financial development on urban-rural income gap combining with the effect mechanism. Finally build two VAR models to do an empirical test including Co-integration test, Granger causality test, impulse response analysis and variance decomposition analysis by collecting related data.Through empirical testing, we get the following conclusions:firstly, there is a long-term equilibrium relationship and a positive correlation between financial development and urban-rural income gap; secondly, there is a negative correlation and one-way causal relationship between financial efficiency and urban-rural income gap. and financial efficiency can effectively narrow down the urban-rural income gap; thirdly the development of the insurance market and the stock market has significant and strong impact on the income gap between urban and rural areas; finally, the rate of urbanization and the level of financial support for agriculture have a negative and significant effect on income gap between urban and rural areas.To narrow down the income gap between urban and rural areas, improve the income level of farmers, the article presents several policy recommendations. Firstly, develop rural financial institutions to improve rural financial supply. Secondly optimize financial institutions’operating environment to promote the rational allocation of resources. Thirdly, increase the intensity of services of securities markets and insurance markets in rural areas.Finally promote urbanization and increase financial support for agriculture.