The Empirical Research On Financial Development And Urban-rural Income Gap Of China

With the rapid development of our economy, the income gap between urban and rural China gradually widening, especially after the reform and opening up, this gap is more evident. Domestic and foreign scholars have found through research, financial development not balanced will bring the income gap, and because of China’s dual economic structure on the urban and rural, the imbalanced financial development will directly lead to the income gap between urban and rural areas continue to expand, which will bring great negative impact on the economic development of our country, and may even trigger a series of social problems. Therefore, this paper thinks that the financial development and the income gap between urban and rural areas research significance.On the impact of financial development to the income distribution on the question of the existence of three different theories:the first thought that the early stages of the financial development will increase the income gap, with the development of technology will gradually narrow the income gap, that we are familiar with the Kuznets hypothesis; second theories that help narrow the income gap of financial development; the last theory is that financial development will continue to expand the income gap. These three theories seemingly are very different, but they all have a common theoretical foundation:financial development can improve the income level. The starting point of each theory and research routes are roughly the same, but is that the financial development to make the vulnerable groups from the initial stage of human capital and wealth by the relative lack of in the financial development in the process of gradually enjoy differences exist in the process of financial services, eventually lead to different results of the study. Kuznets theory is that in the early days, the low income group through a process to accumulate wealth until their wealth value reached into the financial intermediary threshold, thus enjoy the financial services, increase income; financial development theory believes that the financial market competition will make the financial market and financial intermediary rapid development, thereby reducing access to financial intermediaries the threshold, let more low-income groups can enjoy financial services, so as to narrow the income gap; financial development theory of bad that financial development direction is controlled by the few vested interest groups, in order to safeguard their own interests, which will lead to the expansion of the income gap.In this paper, through theoretical analysis, although China’s financial development speed is very fast, but due to a series of problems left over by history and the country’s special policy, making China’s financial development long-term bias in the city and industrial, urban and rural financial development of the non-balanced ten for severe, development scale and efficiency of rural finance far behind the city, which makes the urban-rural income gap has been widening. The empirical results show that the scale of the financial development in China, expanding the income gap between urban and rural areas, and the efficiency of financial development to the income gap between urban and rural areas has improved, but the improvement efforts than financial development scale brings negative effect. On the whole, China’s financial development will continue to expand the income gap between urban and rural area, it is on the front of the theoretical analysis, a strong support. At the same time, this paper also found that the process of the city constantly can effectively reduce the income gap between urban and rural areas, and rural financial development will increase the income gap between urban and rural areas, and these are consistent with the fact.Finally, this paper summarizes the results of empirical analysis, combined with our current system and special conditions that put forward the following policy suggestions: to curb the outflow of the rural economy, rural funds for the development of rural areas; implementation of microfinance, rural financial diversification. Achieve a virtuous circle of funds; to establish a diversified rural financial system, improve financial services in rural areas, appropriate to relax the rural financial market access conditions, to solve rural financing difficult problem; the establishment of agricultural insurance, rural area outside to prevent economic loss; strengthen the credit support to small and medium-sized enterprises; appropriate discriminating financial and monetary policies, and promote the balanced development of urban and rural area financial.Of course, many factors affect the income gap between urban and rural in China, financial development is just one of many factors, in the process of model establishment, the author retains only the financial development factors, excluding other factors affecting income gap between urban and rural areas. The benefits of doing so is more evident influence on the income gap, at the same time model will be more concise; shortcomings is to expand the financial development impact on the income gap between urban and rural areas.