Study On Rural Financial Development And Urban-Rural Income Gap In The Western Region

The paper firstly review studies on the theory of financial development and rural-urban income gap as well as the relationship between financial theory and the rural-urban income gap, then review the literatures and summarize the mechanism of financial development’s influence on the rural-urban divide from positive and negative side. Secondly, the paper describes the current situation of the urban-rural income gap and the rural finance development in the western region, then compared with the eastern and central regions and pointed out that the current rural financial problem. Thirdly, the paper based on the 2000-2013 panel data, from the perspective of the rural financial development scale and financial structure, puts forward relevant assumptions and establishes the Panel VAR model and VECM model for empirical analysis.The paper argues that the expansion of rural financial development will further increase the rural-urban divide, but with the improvement of rural financial structure, the rural-urban divide will be narrowed. Finally, according to the conclusion, the paper gives policy recommendations to narrow the urban-rural income gap, including curb the rural capital outflow, increase credit support and accelerate the development of local agriculture-related financial institutions and so on.