Financial Development,transportation Infrastructure Construction And Gap Between Rural And Urban Citizens

The average annual growth rate of GDP is close to 10% during the period of 1991-2014 in China. China has surpassed Japan and became the second-largest economic entity in the world because the GDP has reached 5.9 trillion dollar and been honored as “Chinese miracle” by the world. But there are some inevitable problems in the rapid development of Chinese economy at the same time. The income gap between rural and urban citizens has really come to the forefront along with the income level of people has rising. The income gap between rural and urban citizens was 2.57 in 1978 and increase to 3.03 in 2013 according to statistical data published by the state statistics bureau. The widening income gap will not only damage the interests of low-income earners but also affect Chinese economic development and social stability. Therefore this paper decides to discuss the influence of financial development and transportation infrastructure to the urban and rural income disparity using the empirical analysis and theoretical analysis respectively from the angle of financial development and transportation infrastructure and based on the interaction between financial development and transportation infrastructure.first, this paper make a literature review on the relationship between financial development 、 transport infrastructure and urban and rural income disparity to understand the research situation of international and domestic scholars at present and discover the some research loophole. This paper have found that the current researches about the relationship of the financial development、traffic infrastructure and the income gap between rural and urban citizens are relatively complete through literature review. But the scholars generally make research about the effect of the urban and rural income disparity from single factor mentioned above and ignore the intrinsic mechanism between financial development and the transportation infrastructure construction at present.Secondly, constructs the theory of mechanism of the effect to the urban and rural income disparity by the financial development from the direct way and the indirect way. The direct effect of financial development is mainly divided into three categories: threshold effect, the financial development of the disequilibrium effects of financial development, poverty reduction effect; The indirect effect refers to that the financial development act on the transportation infrastructure investment through the five major functions of the financial system at first and then the traffic infrastructure act on the income of residents through employment opportunities、transportation and labor costs、improve productivity of labor and to reduce the income gap between rural and urban citizens ultimately.Then, make the analysis of the current situation and the variation tendency of the financial development, transport infrastructure and urban rural income gap. The main content is that the introduction of current situation about financial development, transport infrastructure and the urban and rural income disparity. Then make a descriptive statistical analysis to inspect the variation tendency using the date from 1978 to 2013, which stands for the reform and opening-up and now.Finally, establish a dynamic panel model to make an empirical analysis on the relationship between financial development, transport infrastructure and the income gap between urban and rural areas using the panel data of 30 provinces、autonomous region and municipalities from 1998~2013 years. And also make a robustness test on the model results to ensure the results reliable and accurate. The results show that when not considering the mediating effect of traffic infrastructure, financial development and transportation infrastructure can reduce the income gap between urban and rural areas significantly and each area of the East、Middle、West is the same. The effect of financial development to the income gap is most strong among them from the eastern region because of its good financial foundation. The transportation infrastructure’s effect is the most strongest from the Middle region because the traffic development has an important role in the process of regional economic development in this place as transport hubs. Along with the raise of financial development level, it also can reduce the income gap between urban and rural role when considering the mediating effect of financial development. The model results also confirmed the existence of the mediating effect of financial development at the same time and the financial development can reduce the income gap between urban and rural areas nationwide. The transportation infrastructure will lead the income gap between urban and rural areas to widening without considering the financial support, the main reason is that the infrastructure investment will totally depend on government fiscal without financial support thus will aggravate the tax burden of people and narrow the investment channels of residents which stands for relative reducing the income of the residents, assuming reduce the urban resident income and the rural resident equally then the urban and rural income disparity will be widening.Based on the above, I offer some the corresponding policy recommendations from three aspects: the financial development, the transportation infrastructure construction and the role of financial support in the process infrastructure investment and hope I can play a little part role on the process of solving the problem about the income gap between rural and urban citizens.