The Analysis On The Effect Of The Financial Market Development On Urban-Rural Income Disparity

Since the reform and opening up, China’s economy has achieved rapid development,people’s income level has been greatly improved.But along with economic development, the urban-rural income gap is expanding. With the financial markets in the national economy gradually improved, its effect on income distribution of residents growing wider.This article attempts to study how financial markets affect the income gap between urban and rural residents from theoretical and empirical.And proposeing policy to narrow the income gap between urban and rural residents.Firstly, Describes the meaning of markets and financial market development finance, and construct an index system to measure financial market development.Then Analysis of the financial market developments on the role of income distribution channels, Establish the financial market developments affect income distribution theoretical framework.Based on the analysis of the current situation and the urban-rural income gap,from the financial sub-market level, using the financial services in the three channel effect theory to explain Of how credit market, stock market, and insurance market impact on the income gap between urban and rural residents,concluding the development of financial markets will widen the income gap between urban and rural residents.Combined with the development of the financial market indicator system and establish VAR model,empirical testing the relationship of the three major financial markets and sub-urban and rural residents income gap.The results show that the develepment of credit markets, stock market and insurance market to some extent expanding the urban-rural income gap, empirically verified the theoretical analysis that the financial market development may expand the urban-rural income gap.Finally,policy suggestions are proposed to narrow urban-rural income gap form the prospective of financial market development. The suggestions include improving the financial market system to meet the needs of rural finance,increasing the credit markets credit to support for rural,strengthening the capacity of financing proliferation in the rural capital market,improving rural insurance market to reduce the level of risk effect.