The Mechanism And Empirical Ananlysis Of The Impact Of Financial Development On The Income Gap Between Urban And Rural Ressidents

The reform of economic system has promoted the development of China's financial industry and the financial system has been gradually improved.The development of the financial industry has promoted the growth of savings and investment.Thus it drives economic growth.But the income gap between urban and rural areas is still a key problem which restricts China's economic development.in the period of 13 th Five-Year Plan,our country puts the problem of farmer's poverty as the important battle.So whether the financial development helps to narrow the income gap?Based on the theory of description of the financial development and the income gap,this paper sums up the conduction mechanism between financial development and income gap: the threshold mechanism,non balanced mechanism,poverty reduction mechanism and the mechanism of economic growth.The threshold effect refers that there is a cost threshold in the financial market.Only when the people reach the minimum threshold can get revenue from financial services and the one below the lowest threshold can not achieves the income through financial development.The financing threshold and human capital threshold leads to the widening income gap between urban and rural residents.Due to historical reasons?the instability of agricultural production and driving capital profit,financial resources distributes imbalanced between urban and rural areas which will have negative effects on the gap.The poverty reduction mechanism is that with the continuous development and improvement of Finance,more new financial institutions appears that poor people can enjoys certain financial services,increases income and narrows the income gap.In this paper,27 provinces in 2005-2014 as the research object,empirically examines the impact of financial development on the urban-rural income gap.The empirical analysis is mainly divided into three parts.The first part mainly examines the relationship between the development and the income gap throughthe PVAR model.In the second part,using the impulse response function and variance decomposition analysis the contribution of the development of financial institutions to the income gap in the eastern,central and western regions.The third part makes a robustness test by using static panel models.Empirical results shows that from a national perspective,the development of financial institutions expands the income gap.From the regional perspective,the development of financial institutions in the eastern region narrows the income gap and widens the income gap in central and western regions.From the perspective of reaction,the central region is higher than the whole country,and the western region is lower than the whole country.The income gap is greatly affected by itself and has a strong stubborn.Based on the conclusions,this paper puts forward some suggestions to promote financial development:developing microbanking,telephone banking,online banking and implementing agent banking to improve the availability of financial services;Improving the financial system to promote the diversification of financial development;coordinating the development of financial industry between city and countryside.