Impact Of Financial Development On Urban-rural Income Gap

Finance is the core of the market economy in modern times, where financial development affects social and economic life in mult-aspects and mult-angles. It influences not only economic growth, but also other economic variables. After more than20years’innovation and development, the great progress has happened in our finance industry, and economy has also been growing with high speed. People’s income has risen to a high level, but the national income gap becomes wider. It affects the stability of the society and national economy seriously. The widening of people’s income gap has become the focal problem in the social and economic life of our country, and it gets to a common on the improvement to income distribution of our country. It sprung up in1990s’with the view of financial development to discuss the forming of income gap, while the different explanations for the forming of the income gap of China always ignore the influence of financial development. With this new view to analyze income distribution of China, it is in favor of cognition the forming of the income gap further, and helps the establishment and adjustment of the macroeconomic policy.Many economists home and abroad have made a lot of theoretical and empirical studies on the relationship between financial development and income distribution. Many past empirical papers only choose the index of financial depth to measure the financial development level, but the financial development is a very comprehensive concept, including the scale, the efficiency and the configuration. So the empirical conclusions resulting from only using the index of financial depth to measure the financial development level may be not consistent with the reality. Then, this thesis collects the datasets of China from1992to2012, sets up FIR, FE, FS index to measure finance development of the scale, efficiency and configuration, establishes Q JN and CR index to measure the income gap of residents in the whole country and in urban-rural, then utilizes Unit Root test, Granger test of causality, co-integration regression, Vector Error Correction model, Impulse Response Function and Variance Decomposition to analyze the relationship between financial development and income distribution gap in China, from long-run and short-run.