A Study On The Impact Of Financial Development On Urban - Rural Income Gap In Zhejiang Province

With the rapid development of China’s financial industry, the amount of total assets has been increased continued, the financial efficiency is also improved since 1978.As one of the highest per capita income levels in province, Zhejiang has made a great achievement in economic development. The quality of urban and rural residents has been significantly improved. With the rapid development of economy and finance, the income between urban and rural is changing, numerically from 2.01 in 1978 to 2.49 in 2006, and then gradually decreased to 2.08 in 2014. So, how does the finance impact on the urban-rural income gap? And through which way? The paper would discuss the mechanism of urban-rural income gap from the perspective of finance, and analyze how to narrow the gap.Firstly, this paper discussed the theory after referred the reference at home and abroad. The development of the theory of financial impact on the income gap is roughly divided into three categories:financial development has led to increase income gap, financial development led to reduce income gap and the impact on urban and rural income gap has an inverted "U" type. Then this paper analysis it from an unbalance in turn effect, the threshold effect of financial development and poverty reduction effect in three areas.Secondly, the paper discussed the actual situation as the starting point, used statistical methods to describe the present situation of Zhejiang Province financial development stage, development status and urban-rural income gap. Displayed by the statistical data index, financial indicators in Zhejiang Province have emerged as a steady upward trend, while the income gap is showing a downward trend after the first rise.Finally, this paper used 1978--2014 years of empirical data. And it picked the scale of financial development indicator, efficiency indicator and investment indicator to describe the level of financial development in Zhejiang. While it selected a between-group Theil index to describe the income gap between urban and rural areas in Zhejiang Province. After selected indicators, we use ADF unit root test to test, and to determine whether it is a single whole and stable order. Then we made VAR model to determine the impact of financial development in Zhejiang Province to urban-rural income gap. After that we used Johansen counteraction test, to correct the error. At last we establish VEC model and Granger causality assay to determine the causal link corresponding indicators of financial development and income gap between the article. Finally, we selected impulse response analysis and variance decomposition to analysis.Learning from Johansen counteraction test results:it has a long and stable counteraction relationship between financial development scale, development efficiency and investment and the income gap. Among the relationship, the scale of financial development and the income gap is a positive correlation, the financial development efficiency, investment and the income gap is negative one. Learning from Granger causality test results:financial development scale and investment is Granger factors which affecting the income gap change.Comprehensive theory, and actual empirical situation, the paper explores the solutions about how to narrow the income gap in Zhejiang Province. First, we need to control the scale of financial appropriately, and balance the province’s financial resources. Secondly, we need to improve the financial efficiency and make farmers and agro-perfect credit system institutions perfect. Furthermore, we need to optimize financial structure, and actively to catch the "Internet+" to increase the income of residents. Finally, we need to strengthen the formal financial institutions and the informal financial institutions on supporting for SMEs. It is conducive to the continuous and stable development of society and economy.