An Empirical Study On The Effects Of Rural Finance Development On Income Gap Of Rural Residents

With the economic growth and social change, historic changes have taken place in the rural area of China. Agriculture is gradually moving towards modernization and industrialization, the construction of new socialist countryside is steadily advancing, and the life of rural residents is being significantly improved, but the rural residents' income gap is further widening. However the enlargement of rural residents' income gap can cause various negative effects to the society. For example, it will increase the rate of crime and threatens social stability, so the large gap between the rich and the poor is harmful to the economic stable development in China. Therefore, how to narrow the gap between the rural residents income is becoming an important topic in the governments and academes. However, as the core of modern agricultural economy, rural finance is the most important capital element allocation system in the development of rural economy, and plays a key role in the process of China's rural economy development, therefore, rural finance affects the rural residents' income growth and income distribution in China. And "three agriculture" problem and the construction of new socialist countryside need a strong and vigorous development of rural finance to support. Therefore, a good rural financial development system should be required to escort the development of rural economy, thus optimize the combination of agricultural production factors and achieving better and faster development of agriculture and then increase the income level of rural residents and reduce the income gap between rural residents.Firstly this paper reviews the relevant research literatures at home and abroad, summarizes the research progress of the current situation, and points out the shortcomings of the existing research. Secondly, the paper defines the concept of the rural financial development, introduces its related theory, and discusses the theoretical basis and influence path of rural financial development on rural residents' income gap. Again, In view of the availability of data, this article refers to the relevant research literatures, such as Zhang Jingshi and Guo Pei(2010), Sun Yukui(2014), estimates the rural Gini coefficient of 20 provinces(cities and districts) in China, and analyzes the current situation of the rural residents' income gap in the East, middle and west regions respectively. Then, based on the provincial panel data of China's 20 provinces(cities, districts) between 1997 and 1997, this paper builds the panel VAR model from two aspects of the national and regional levels, examines the influence of rural financial development on rural residents' income gap.The research results show that: from the national level, the scale of rural financial development and the efficiency of the rural financial development are all the causes of changes of the rural residents' income gap. The result of PVAR model shows, the rural financial development scale has a positive impact on the income gap of rural residents, namely, the inequality between the rich and the poor in rural areas will become more severe with the expansion of the scale of rural financial development. The result also shows that the efficiency of rural financial development has a negative effect on the income gap of rural residents, namely, the inequality between the rich and the poor will be alleviated with the improvement of the efficiency of rural finance. From the eastern, central and western regions level, in terms of the rural financial development scale variables, the expansion of the rural financial development in the central region of China has a significant positive influence on the Gini coefficient, namely in the central region the expansion of the rural financial development scale will increase rural residents' income inequality, and in terms of efficiency of rural financial variables, the influence of western rural financial development efficiency on rural residents' income gap is negative and significant, meaning that with continuous improvement of the efficiency of rural financial in the western region, the income gap of rural residents will continue to shrink; Combined with the research at national level and regional level, the influence degree of the increment of efficiency of rural financial development on rural residents' income gap changes were greater than the scale of rural financial development.Finally, based on the above research results, this paper puts forward some policy suggestions on how to promote the rural financial development, thus provide better service for the rural residents, and then improve the income gap between rural residents.