The Effect Of Financial Development On Income Gap In BRICs

In recent years,China,Russia,India,Brazil and South Africa have become the fastest growing emerging market economies and have made outstanding contributions to the global economic growth.These countries are known as BRICs.Against the background of the international financial crisis,the economic and financial development of the BRICs countries still has advantages,but at the same time,the problem of excessive income gap has plagued these countries.During a period of great development,changes and adjustments,the BRICs countries are faced with more internal and external challenges.Therefore,how to ease the income gap and break down the development difficulties is particularly important and urgent.Finance is the core of the modern economy.And financial functions,especially resources allocation,are significantly helpful to shorten the excessive income gap.In fact,the relationship between financial development and income gap has always been a hot topic for scholars.However,about the impact of financial development on income gap,the academic community has not formed a unified conclusion.Therefore,it is necessary to further explore the mechanism of financial development on income gap.To this end,this article takes the impact mechanism of the financial development on income gap of BRICs as its object.Based on the situation of the financial development and income gap of BRICs,the paper constructs the panel threshold regression model and sets financial development as the threshold variable,deeply analyzing the relationship between them.This paper not only confirms that financial development has a threshold effect on income gap,but also explores the impact mechanism between them.So this study not only enriches the existing theories of financial development and income gap,but also provides the basis for formulating policies of financial development and income distribution in the BRICs countries.The article confirms the threshold effect of financial development on income gap.The different dimensions of financial development have different effects on income gap.Specifically,in the BRICs countries,the scale and the efficiency of financial development have a narrowing effect on the income gap.However,the relationship between financial development and income gap is non-linear.The scale of financial development has a double threshold effect on income gap,while the efficiency has a single threshold effect on income gap.Besides,the financial development structure also has a double threshold effect on income gap.The optimization of financial development structure can widen the gap,but after the threshold is crossed,this expansion effect is greatly weakened.The paper believes that the above conclusions are mainly due to the direct and indirect mechanisms of financial development affecting income gap.As to different stages and levels of financial development,the direct influence mechanism and indirect influence mechanism have different directions and degrees,so the impact of financial development on income gap will change,leading to the threshold effects.Accordingly,BRICs should actively promote policies and measures to promote domestic financial development and break through the threshold of financial development.While promoting their domestic financial development,these countries should effectively alleviate the dilemmas of expanding income gap.Finally,taking the financial reforms of BRICs as a chance,the paper puts forward some proposals as followed.On the one hand,BRICs should scientifically and rationally guiding domestic financial development,promote financial reform step by step,lower the barriers of financial services,and actively develop inclusive finance.On the other hand,as an important member of BRICS,with its own economic and financial development,China should devote itself to deepening BRICs cooperation and jointly creates the next "golden decade" for BRICs cooperation with other BRICs countries,making the world change.