The Influence Of Financial Decentralization On Urban-rural Income Gap

After entering the middle income stage,with the acceleration of the aging process of the population,resource and environmental tensions and income inequality,it is urgent to find an effective way to solve the urban and rural income gap of China.As the blood of regional economic development,financial resources have a profound significance for the economic construction of urban and rural areas.Therefore,it is necessary to study the urban-rural income gap from a financial perspective.As one of the main participants in the market,local governments have an important role in realizing regional economic development and income distribution balance.They often play an important role in intervening regional resource allocation and mobilizing regional economic development.The impact of policy intent preferences on the allocation of financial resources is extremely important.Based on the background of local government behavior intervention,this paper uses financial decentralization as a research perspective to study the change of urban-rural income gap.Financial decentralization is a series of explicit and implicit institutional arrangements for the allocation and distribution of financial resources between different levels of government for promoting long-term economic growth and stimulating local development of the economy.In reviewing the past process of financial decentralization reform and development,using descriptive statistical methods to portray the development status of urban and rural income gaps,the characteristics of their respective developments are summarized.Based on the analysis of theoretical mechanism,a two-sector economic development model including urban and rural areas is constructed,and local government's behavioral preferences for efficiency and fairness are incorporated.Including the factors such as financial decentralization,urbanization development and urban-rural income gap,the three research inferences of this paper are proposed through model deduction: Inference 1.The improvement of financing level in urban and rural areas will bring the income level of regional residents.The improvement of financial decentralization has a restraining effect on the urban-rural income gap.Inference 2,under the incentive of the central government,local government's behavioral preference based on the distribution of fairness will help to narrow the urban-rural income gap,while the economic efficiency behavioral preference will expand urban and rural income gap;inference 3,the urban-rural income gap will gradually decrease as the level of urbanization increases.In order to further verify the relationship between the two,based on the panel data of China's provinces from 1998 to 2016,under the stability and co-integration test,the static solid effect model was selected for empirical regression.And the empirical data is used to verify the impact of financial decentralization under government behavioral preferences on urban-rural income gap.Using threshold regression models we find the thresholds that exist.In order to further ensure the reliability of the research results,the robustness test was carried out on the original estimation results by Changing the dynamic GMM model,adding control variables,replacing the core explanatory variables and the explained variables.Furthermore,the following research conclusions were obtained:(1)Financial decentralization is a “bottom-up” innovation reform led by local governments for the motive of regional economic development.The core of decentralization is closely related to the development,allocation and supervision of financial resources.Local governments have greater interference in the allocation of financial decentralized resources.(2)China still has serious problems of uneven income distribution.Although the urban-rural income ratio is slowly decreasing,the relative income gap is gradually narrowing,but the absolute income gap is constantly widening.(3)There is an inverted U-shaped quadratic linear relationship between financial decentralization and urban-rural income gap.With the deepening of financial decentralization,the urban-rural income gap shows a trend of expanding first and then narrowing.In the short term,it is a positive effect while long-term performance is a negative effect.(4)Under the government's performance incentives,the improvement of the distribution of fair behavior preferences will effectively narrow the urban-rural income gap,and the relative increase in efficiency-biased behavior bias will widen the urban-rural income gap.(5)Financial decentralization is influenced by local government's preference for efficiency and distribution of fair.The government's preference determines the effect of financial decentralization on urban and rural income.It makes the financial decentralization have a lagging effect on the adjustment of the urban-rural income gap.(6)Under the joint intervention of financial resource allocation and government behavior preference,the effect of financial decentralization on urban-rural income gap has a threshold value of 49.36%.(7)There is an inverted U-shaped relationship between regional economic development level and urban-rural income gap;Fiscal decentralization,fixed asset investment,and per capita education level can all narrow the urban-rural income gap while urbanization will widen the income gap between urban and rural areas.Finally,based on the conclusions of this paper,the following policy recommendations are proposed: First,give full play to the financial decentralization and financing functions to serve urban and rural economic construction;second,moderately decentralize under the premise of financial centralization,give full play to the financial Stabilize the role of regulators,establish a sound risk monitoring mechanism;Third,guide the performance objectives from economic efficiency to comprehensive and coordinated development,and increase the proportion of residents' income in economic development results;Fourth,accelerate the role of government gradually from market participants to the change of regulators;Fifth,strengthen the ability to serve the regional economic development with the elements represented by finance,fixed assets investment,education,etc.,accelerate the process of urbanization,improve the quality of development,improve various supporting resources,and break the barriers to free movement of labor.