The Influence Of The Financial Development On The Income Gap Between Urban And Rural Areas In Liaoning Province

Since 1978, with the development of national economy, the living standards of people in China have achieved a great increase, there is no doubts that reforming and opening up has brought lots of benefits to China. However, the income gap between urban and rural areas is increasing quickly in the mean time, it has caused many noticeable problems to the social development.The problem of income gap is not only conducive to economic development, but also become a big threat to our social stability. In China, there are great differences among economic regions. In 2003, the policy of improving industrial base in northeast has given Liaoning a good opportunity.The economic growth of Liaoning province is of great significance to the Northeast China, this article choose to focus on studying the financial development and residents’ income gap between urban and rural areas of Liaoning province.The main purpose of this paper is to study the effect of financial development on the income gap between urban and rural areas, and finding the methods to reduce the income gap between urban and rural areas. According to the features of economic development in Liaoning Province and other scholars research on financial development and urban-rural income gap, this paper focus on the influence of the financial development in Liaoning Province on urban and rural residents income gap. In order to describe the change of the financial development in Liaoning Province clearly, this article selects three representative indicators, from the perspectives of scale, efficiency and structure study the changing process of financial development; This paper use theil index as another indicator to measure the urban and rural residents income gap.On the basis of theoretical analysis, this paper selected the relevant statistics from 1978 to 2013, using the financial development indicators to explore the impact of financial development on the income gap between urban and rural areas. In order to abtain a more accurate result, we use economic growth as a control variable in the research. In this paper, the result of quantitative study is that in the long term there is a connection between financial development and income gap in Liaoning Province. To make a further explanation, that is, with the continuously increasing scale of financial development, there is a trend of widening income gap between urban and rural areas. While, the increase of structure and efficiency of financial development will help to narrow the income gap between urban and rural areas. Finally, this paper gives several measures to decrease the income gap between urban and rural areas.