Research Of Income Gap Between Urban And Rural Residents In Central Area From The Persepctive Of Finance Development

The academic circles opend a lot of theory and empirical research of the dynamicgap of income of urban and rural residents in the process of financial developmentissues. But among the current study, the vast majority of the literature is to explore therelationship between financial development and income gap between urban and ruralresidents which based on China’s overall or the eastern region,but few focused on thecentral region. In the related literature at home and abroad, we can change theorymechanism of income gap between urban and rural residents which financialdevelopment effects attributed to three effects: the threshold effect, poverty reductioneffect and non equilibrium effects of financial development. This paper based on thethree effect theory and the core periphery theory, circular and cumulative causationtheory, growth pole theory and financial development theory. To lay a solid theoreticalfoundation, this paper elaborates on the financial development of the central region,which focus on the nine provinces of central region financial development, especiallyfor the existence of financial development in central rural area. At the same time, thispaper takes time as the perspective to analyse the dynamic evolution of income ofurban and rural residents in the central region. In addition, this paper also carried outcomparative analysis on the central and eastern parts of the financial development andthe income gap between urban and rural residents interaction mechanism. We find that,compared with the provinces of eastern region, financial development level of thecentral area is relatively low, but income gap between urban and rural residentsof thecentral area is higher. Effects of financial development for the income gap betweenurban and rural residentsin in the central region, which to be assisted in the empiricalanalysis. In order to eliminate the endogeneity problem of econometric model forempirical regression results, we choose the System GMM which belongs toinstrumental variables estimation method.The main conclusions of this paper are as follows: firstly, the theoretical analysisof this paper reviews the theoretical mechanism of the influence of financialdevelopment of the income gap between urban and rural areas in the middle area.Financial development mainly through three effect to influence the income gapbetween urban and rural residents. Secondly, through analyzing the current situationof financial development and rural financial development in the central regions,ruralfinancial institutions in the central area will be found put most of the credit funds from rural to city, which leading to rural development is lack of funds and agriculturalloans accounted for the proportion of the first industry is low. The threshold effect ofthe financial development of the central region and non equilibrium effect is fargreater than the effect of reducing poverty. Thirdly, the empirical regression modelshowed that, the financial development of the central region has a positive impact onthe income gap between urban and rural residents, namely the financial developmentof central China worsen the income gap between urban and rural residents. At thesame time, the development of the urbanization level widening income gap betweenurban and rural residents in the central region and the adjustment of industrialstructure, the government intervention in economic activity is expanding the incomegap between urban and rural residents in central region. Influenced by economicdevelopment, the income gap between urban and rural residentsin in central regionwhich influenced by economic openness is not significant.