The Effect Of Financial Development On Urban And Rural Income Gap

The function and influence of the economic growth to the financial development has been attended and researched by a lot of scholars at home and abroad in the latest years, it has been proved that there are some certain connections between the financial development and the economic growth. But in the process of the economic growth, one reason is the unaverage of development, and the other one is the difference of allocation distribution system, it comes into the income differential, especially the income differential of town and country in china. Therefore we can infer that there is logical connection between the financial development and the income differential of town and country.Since the policy of reformation and opening, with the high speed development of economy, the income differential of town and country in our nation presents a tendency to expand gradually, if considering into the factors which are not related to currency, such as medicine, education, social security and so on, the income differential of town and country in our nation has got the highest level in the world, and it has become a serious obstruction for our country to construct the socialist harmonious society, and also a problem to the economic social development and stability of modern stage, the government and academia have pay special attention on it. A lot of scholars of our country have researched the expanding reason of the income differential of town and country from different angles. The writer concluded it as the following aspects: the special stage of economic growth or development, the transformation of ownership and structure, the transformation of allocation distribution system and the unfair of the second allocation, the division of town and country and the beneficial transportation from country to town, the scissors differential policy between farm products and industrial products, the policy of census and so on. In these reasons, although the financial development and its unbalance are not referred, most of them are explained in the reasons of economic growth and policies, and the discussions are not detailed and thorough enough.The article utilized the financial development theory, income allocation theory, Tomasz bates theory, and extended Tomasz bates theory, which is from economics. It made a detail theoretical elaboration on the influence of the financial development to the income differential of town and country, and also summarized some opinions from scholars at home and abroad. It believes that there are three theoretical opinions on it: the beneficial theory of the financial development, the harmful theory of the financial development, and the extended Tomasz bates theory. The writer divided the financial development into two indices during the research process in the article; they are the scale of financial development and the efficiency of the financial development. At the same time, considering to the two different areas of town and country that appeared in the article, the indices were made a further division, they were the scale of the financial development of town, the scale of the financial development of country, the efficiency of the financial development of town, the efficiency of the financial development of country.During the analysis of the financial development to the influence and function of the income differential of town and country, the article analysed simply the financial factors and unfinancial factors which have influenced the income differential of town and country of our nation, then it creativity put forward to the two ways that how the financial development influence the income differential of town and country: 1. financial developmentâ†'economic growthâ†'the unfair of the income allocation distribution systemâ†'the income differential of town and country.2. The unbalance of financial development of town and country (financial development of country, financial development of town)â†'the capital of country flows into townâ†'the deposits of country are transformed into the investing or financial deposit of townâ†'the differential of economic development of town and countryâ†'the income differential of town and country is expanding. The two transmit ways showed the influence more clearly of the financial development to the income differential of town and country, and they also set a basis for the positivist model of the later essay.In the forth part of the article, the writer structured two mathematical models according to the two transmit ways:1.Y=FDS+FDE+u ("u" is the random error) 2. Y=GFDS+GFDE+u ("u" is the random error). By using the 20 years' sequential data of 1989—2008 Anhui province as the basis, and according to two mathematic models and the division indices which are referred above, the writer made a positivist inspection and analysis to the relationship of the financial development and the income differential of town and country of Anhui province, and got a particular result of the positivist model.The last positivist research of the article indicates that: 1. the scale of the financial development expands the income differential of town and country, while the efficiency of the development is benefit to reduce the income differential of town and country. But the function and potency of the efficiency of financial development is less clearly than the scale of financial development, the financial development is still expanding the income differential of town and country, it proves the harmful theory of the financial development to a certain degree.2. the development of the financial scale and efficiency of town are all making the income differential of town and country more wide, the development of financial efficiency of country reduces the income differential of town and country, but the effect is not too obvious. In the last part, the writer summarized the positivist conclusion, and pointed out some related suggestions combing with the situation of Anhui province.Certainly, there are also some shortages of this article. It is not abundant enough to master the documentation of home and abroad; besides, there are too many factors that affect the income differential of town and country in china, and financial factor can not be treated as the most important. But in the construction of model, the writer just retained the factors of financial development, and got rid of other factors that affected the income differential of town and country, and it resulted the expanding of the influence and potency that financial development to the income differential of town and country.