The Impact Of The Development Of Rural Finance On The Income Gap Between Urban And Rural Areas

Since China’s reform and opening up, China’s economic development has made remarkable achievements. Its economic development level has been at the forefront of the world, however, in its sustained economic growth, per capita income is also rising, the income gap between residents, especially the income gap between rural residents and urban residents.This article studies and draws on the domestic and foreign related theory research literature, in summary they research the merit and the insufficiency foundation above the research method,research ideas were improved, and then it summarizes the current situation and characteristics of China’s urban-rural income gap and rural financial development. In this paper, the development of rural finance and rural financial development efficiency of China’s rural financial development, and then introduce the economic development level, government behavior, urbanization level of three control variables to build a measurement model, the use of 1997-2013 in China’s provincial panel data to study the relationship between rural financial development and Urban-Rural income gap。 At the same time, the characteristics of the two may exist in the nonlinear relationship, the level of economic development as the threshold variable conditions, the panel threshold test. The paper has discussed and analyzed the path and the internal mechanism of the rural financial development in China’s urban-rural income gap.It is found that the main mechanism of the rural financial development to the urban-rural income gap is: rural financial institutions to provide credit to rural residents to enter the threshold value of the impact of the gap between urban and rural income. Secondly, the impact of the rural financial development on the rural economy in the indirect transmission to the income side of the impact. Empirical part: the scale of China’s rural financial development is positively related to the increase of urban and rural income gap, the two have cointegration relationship; the efficiency of rural financial development and urban-rural income gap has negative correlation, that is, the improvement of rural financial development can increase the gap between urban and rural areas. Under the condition of low level of economic development, the scale of rural financial development plays a positive role in the expansion of urban and rural income gap, which has a negative effect on reducing income gap. When the level of economic development reaches a certain stage, the positive effect of the scale of rural financial development on urban and rural income gap is weakened.According to the research conclusion, the paper puts forward some policy suggestions: the government should increase the supply of rural financial resources, promote the competition of rural financial markets, improve the credit system of rural financial market, and promote the financial institutions in rural areas to reduce credit threshold. Government should change the past government financial support methods, increase rural financial support, accelerate the construction of rural infrastructure, the government should also deal with the rural financial system to optimize and improve.