Analysis On Urban Tendency Of Government Financial, Finance Market Unbalance Development And Urban-rural Income Gap

The issue of income distribution has been a hotspot of economic research. With the development of the urbanization, the contradiction between urban and rural income distribution problems has exposed. It makes how to deal with urban and rural income distribution become one of the key problems of economic and social stability. In many Chinese government meetings, the government has repeatedly stressed the problem of the urban-rural income gap. Therefore, to find a solution for the urban-rural income gap, studying the influence factors is particularly important. Domestic scholars have done a lot of research on it. According to the neoclassical growth theory, here I select financial market imbalances and the government investment tendency as the research objects, to build a dynamic general equilibrium model, then use the1996--2010Chinese macro-statistics to calibrate and numerical simulate the model. I obtained the relationship between the two factors and urban-rural income gap.This paper is divided into five parts:The first part is an introduction, which describes the background and significance of the study, and briefly summarizes the research methods, ideas and innovations of this study. The second part is a literature review. This section summarizes many scholars’researches at home and abroad on the urban-rural income gap. I sort of the researches which is relevant with my study for a brief introduction. The third part is to define the study objects and introduce the general situation of the objects. Actually this part systematically states the development trends of Chinese urban and rural income gap as well as government finance investment and financial market condition. Then compare the difference of government finance investment and financial market development in the urban and rural, with statistics as support. This section also assumes the relationship between the study variables and urban-rural gap through the study. The fourth part is the core of this paper and the main object of study. The main idea is to establish a dynamic general equilibrium model, calibrate and simulate the model through all collected macro data. The fifth part is a brief summary, and give policy recommendations according to the study results.Based on the model study, this paper comes to believe that no matter the urban tendency of government finance investment or the financial market unbalance development has a crucial influence on the income gap, if there are no other factors. The factor about financial markets has a much bigger influence comparing with the government finance investment. Let’s think about a situation, which the famers support themselves only through agriculture, and there is no any other way to promote farmers’ property. In the meantime, people in urban have many methods to invest and increase their property. In this case, it will push the outflow of funds in rural area. Then finally output of rural area will also be reduced. The urban tendency of government financial investment strategy will undoubtedly promote urban economic development and further expand the income gap between urban and rural residents. Therefore, we must vigorously develop the rural finance, and increase government financial investment in the rural areas.