Empirical Research Of Financial Development And Income Gap During China’s Economic Transition Period

With the rapid development of economy in China,Financial development is also increasingly accelerating.Can Financial development narrow the income gap between residents?Which gradually becomes a hot topic in the academic research around the world.First,we focused on the Interactive transmission mechanism of Financial development and Income gap in this paper,combining with the course of Financial development and the actual situation of the income gap between residents in China at the same time,and described the category of financial development and income gap from different perspectives.Based on the analysis of income gap between urban and rural residents, the income gap between regions, and the income gap between industries,this paper attempts to further explore the relationship between the income gap between residents and financial development.Then,we put forward the theory hypothesis of the relationship between financial development(including the scale of financial development,the efficiency of financial development and the development of modern department)and the income gap between residents,assuming that the scale of financial development and the income gap were positively correlated, and the efficiency of financial development were negatively correlated with the income gap,combining with the research results of scholars around the world and the actual situation of financial development and income gap between residents in China.In the empirical part,this paper used China’s macroeconomic data from1978to2013,the empirical results showed that the long-term stable cointegration relationship among the four indicator variables(including the scale of financial development, the efficiency of financial development, the development of the modern department and the income gap between residents)do exist,and the assumptions made earlier also had been been confirmed,through unit root test(ADF), Johanson cointegration test,establishing the vector error correction model (VECM) and Granger causality test.And in the Granger causality test,we found that the increased scale of financial development is the Granger reasons for the widened income gap between residents,and the improvd efficiency of financial development is the Granger reasons for the narrowed income gap between residents.The empirical results shows that blind expansion of the scale of finance development will lead to the widening income gap between residents,however Improving the efficiency of financial development will help to mitigate the income gap between residents.Given China’s current level of wealth gap between residents has exceeded the international warning line,so narrowing the income gap between residents should be the focus of China’s economic development policy.In sixth part of this paper,baesd on the research results of many scholars and careful analysis on the empirical results of this paper,we put forward the corresponding comments and suggestions of narrowing the income gap between residents.I think,firstly,underdeveloped regions,industries and sectors should get the financial support in the reform of the financial system; secondly,we should vigorously develop rural financial system,modernen rural financial system,and improve the efficiency of rural finance system;at last,we should improve the efficiency of financial development, especially of the banking sector.These initiatives should be considered by China’s government in the reform of the financial system in the coming period.