The Impact Of Financial Literacy On Income Inequality Within Rural Residents

During the process of China’s reform and opening up,remarkable achievements have been made in rural construction,leading to a significant improvement in the living standards of farmers and a continuous increase in their income.However,due to wealth concentration in the hands of a few individuals,the income gap within rural areas has continued to widen,hindering the sustainable growth of the rural economy and causing significant damage to its development.Reducing the income disparity within rural areas not only ensures the circulation of human and material resources but also promotes economic growth in the countryside,while maintaining social stability.In recent years,the rapid development of China’s financial market and the continuous improvement of the financial environment have led to a substantial increase in the number of users and participants in various financial instruments and markets.This involvement is not limited to experts and scholars but also includes a growing number of ordinary citizens.In this context,it is crucial to enhance one’s financial literacy and strengthen awareness of financial risks in order to effectively respond to financial risks,increase income through participation in the financial market,reduce income disparity,and break through the rigid income strata.Therefor,enhancing the financial literacy of rural households can bring new ideas to address the income disparity within China’s rural areas and become a new breakthrough in overcoming the dilemma of widening income gaps.Currently,research on financial literacy both domestically and internationally mostly focuses on analyzing the impact on income disparity between urban and rural residents,and the direct connection between financial literacy and income disparity within rural areas has not received sufficient attention.Building upon this foundation,this paper takes the income disparity within rural areas as its research objective and combines theoretical and empirical analysis to explore the impact of financial literacy on income disparity within rural areas.The aim is to enhance the financial literacy of rural residents,narrow the income gap within rural areas,and provide suggestions and insights for achieving rural revitalization and promoting common prosperity.This article aims to explore the impact of financial literacy on income inequality within rural areas.Based on the 2019 Chinese Household Finance Survey conducted by the Southwestern University of Finance and Economics,this study employs factor analysis to condense seven financial literacy questions into three factors,and constructs a financial literacy index to evaluate the financial literacy level of rural residents.Using household total income and property income data,an index for measuring income inequality within rural areas is created.The study examines how financial literacy affects income inequality within rural areas,drawing on financial exclusion theory,household finance theory,relative poverty theory,and Kuznets’ inverted U-curve theory.The results indicate that the income gap within rural areas first widens and then narrows,exhibiting an inverted "U"-shaped relationship with financial literacy.The proportion of property income to total income plays a moderating role in the effect of financial literacy on the income gap within rural areas.As rural residents’ financial literacy improves,the income gap in property income between the middle and higher groups will widen.Heterogeneity analysis,robustness tests,and endogeneity tests are conducted,which confirm the reliability of the empirical results.Finally,based on the research findings,scientifically reasonable policy recommendations are proposed,such as improving rural residents’ financial literacy,promoting effective supply of rural financial services,and promoting diversification of rural financial markets.