Dual Financial Structure, Marketization Process And Urban-Rural Income Gap

The contradiction of income gap, especially the contradiction of urban-rural income’s imbalance, which is significant and practical problem, needs Chinese authorities to solve urgently. Although China’s economy industrialization, financialization, urbanization, and marketization process advance rapidly, residents’overall income levels have been steadily improving, China’s income gap in the regional, urban and rural areas and other fields goes up obviously (Wan,2008). Urban-rural income gap’s widening is the most important factor to China’income gap, and the contribution rate to residents’income imbalance is63.66%～65.24%(Li Shangpu and Luo Biliang,2012), which is far more than other developing counties(Eastwood and Lipton,2004). If take the free medical care, unemployment insurance and other non-monetary factors into consideration, China will be one of countries who have the largest urban-rural income gap. When the urban-rural income gap is too large, it not only challenges the fairness and justice, but also social stability. Because of rural residents’higher propensity to consume, the widening of urban-rural income gap pulls down residents’overall level of consumption. Thus it blocks the levels of China’s domestic demand’s enhancing and exacerbates the contradiction of economic structure. They are not conducive to the transformation and upgrading of economy. Therefore, how to narrow the income gap between urban and rural residents must be a priority issue to boost domestic demand and build a harmonious society. This dissertation not only enriches the theories on developing countries’ urban-rural income gap, but also puts forward optimization measures which are more fit to the development of China in practice. Thus it has important and practical significance on putting forward practical macroeconomic policy to cure the imbalances of urban-rural income.Due to the finance’s core position in the modern economic development, financial development and urban-rural income gap attracted much research interest. A growing number of studies began to focus on the relationship between financial development and urban-rural income gap. This dissertation is different from the traditional study and is based on a typical feature with urban and rural dual financial structure in financial unbalanced development from dual financial structure perspective. At the same time, this paper considers the impact of the marketization process on urban-rural income gap in view of the development of China’s regional economy, periodicity and non-equilibrium of China’s economy. This study uses the income and the income distribution theory, dual economy theory, urbanization and income gap as the logical starting point. On the basis of facts of the evolution of China’s urban-rural income gap, this paper links theories with reality to necessary abstract and assumptions, proposes the formation mechanism of China’s urban-rural income gap, takes dual financial structure, marketization process, government behavior and some other factors into a unified analysis framework, combines with parametric method and nonparametric method, to study how dual financial structure’s mechanism and dynamic processes during marketization of different stages affect urban-rural income gap.This study follows the theoretical analysis, empirical test, countermeasures and suggestions. Research contents are summarized as:(1) The theoretical basis and reference. Analyze the typical points of income and income distribution theory, dual economy theory and the theory of urban-rural income gap and absorb reference sections as the theoretical basis and logical starting point of this study.(2) The theoretical framework of income gap between urban and rural region. On the basis of the important evidence of dual financial structure and market reformation, we reveal the two channels, construct urban-rural income gap’s theory analysis framework under the marketization and analyze China’s urban-rural income gap’s formation mechanism and possible mechanism of convergence in the dual power of government and market.(3) The characteristic facts of the urban-rural income gap’s changing in China. From the macro, regional and marketization, the time, structure, income sources and some other factors portray China’s urban-rural income gap’s evolution and performance characteristic.(4) The empirical static analysis of the effects of the dual financial structure and marketization on the urban-rural income gap. A comprehensive analysis of the dual financial structure and marketization on the urban-rural income gap’s empirical evidence from provinces and structures, tests the effects of concrete.(5) The empirical dynamic analysis of the effects of the dual financial structure and marketization on the urban-rural income gap. Use parameter estimation of regional grouping and non-parametric methods to study the dynamic trend presented by urban-rural dual financial structural coefficient when changes with the development of marketization. Analyze the marketization process’s overall effects on urban-rural income gap, and analyze process of how to affect urban-rural income gap’s changing through affecting dual finance and some other channels.(6) Policy recommendations to control urban-rural income gap on the basis of this study. Propose specific policy to manage urban-rural income gap on the basis this subject’s theory and empirical analysis. Research suggest:(1) since the reform and opening up, the overall income gap between urban and rural areas in China fluctuated upward trend, and all kinds of income source structures are quite different between urban and rural residents. Among them, wage income and transfer income is an important source of expanding urban-rural income gap, and property income’s contribution rate to the income gap between urban and rural areas is at the fast rising channel.(2)The urban-rural dual financial structure affects the income gap between urban and rural. And it has an inverted U relationship to the urban-rural income gap. In other words, dual financial structure stimulates the widening of urban-rural income gap at the beginning, but promotes the convergence of urban-rural income gap then.(3) The marketization process is good for the rationally flowing of resources, which contribute to the improvement of income and restrain the urban-rural income gap.(4) The urban-rural dual financial structure in marketization process is to contribute to the improvement of income, and ultimately inhibit the widening of the income gap between urban and rural areas.(5) The role of the government in reducing the income gap between urban and rural areas bottlenecks.(6) Neighboring provincial income gap between urban and rural areas have interactive and positive effects. Dual economic structure is an important factor to the expanding of the income gap between urban and rural areas. The urbanization inhibition of income gap between urban and rural areas has not been effectively. Accordingly, this dissertation puts forward some optimization measures. Including:(1) Promote the integration of urban-rural construction and narrow the gap of property incomes between urban and rural areas.(2) Speed up the process of marketization and promote urban and rural resource flow.(3) Lift the financial repression and improve financial efficiency.(4) Regulate the behavior of the government and perfect the policy of income distribution.(5) Break the household registration system and promote the construction of labor market.The innovation points:(1) Build the theoretical framework for analyzing the dual financial structure affecting the urban-rural income gap under the background of marketization process.(2) Explore the influence and dynamic laws of the marketization process on the urban-rural income gap.(3) Find the inverted U-shaped pattern between the dual financial structure and the urban-rural income gap under the marketization process, namely the early marketization, the dual financial structure stimulates the expansion of urban-rural income gap, while marketization of later period to promote convergence of income gap between urban and rural areas.