Research On The Influence Of Rural Financial Development On Framers’ Income Growth In China

Owing to the Reform and Open policy, China’s economy experiences a booming development. However, the development of rural economics is relatively slower than the urban and the large income gap exists. So the most important thing for rural economy currently is increasing farmers’ income and it is also the priority for solving rural issues. The study for increasing farmers’ income is critical to the development of rural finance and socioeconomic development. The imbalance structure of rural finance restrains the growth rate of peasant income. Therefore, the relevant research on increasing farmers’ income from the rural finance perspective is significant and necessary. This paper demonstrates the impact of development of rural finance to farmers, raise a logical way to improve the income of farmers, expecting to solve the problem that engaged in three rural issues supported by rural economy.After a thorough study of relevant references on theoretical study of rural economy development and farmers’ income from domestic and overseas, this thesis analyzes the current status of above two factors. And the function mechanism is developed under such a basis.Then the influence extent on income growth is demonstrated adopting the sample database between 1978 and 2012.Objective variable which can represent the development level of rural economy is constructed as independent variable based on demonstration theory. Independent variable includes the scale merit, structure merit and efficiency merit. And the income merit is set as the dependent variable.Firstly, the statistics of sample data is performed and the relation of independent and dependent variables is presented by scatterplot. Then the unit root is checked for smooth of time sequence. If the result is positive, cointegration test and Granger causality test are carried to get a long-term relationship of the two variables.Then the VEC model is established and impulse response function and variance decomposition are used to validate short-term effects and contributions of independent variable on the counterpart.Finally, the demonstration results are summarized. Proper methods and suggestions to increase farmers’ income are proposed combined with the current status of rural economy.The research results reveal that the enlargement of economy scale and improved efficiency could augment farmer’s income while the development structure is not the Granger reason.Main reason is in that, compared with the support for farming and rural areas from government and financial organizations, farmers receive least financial support. Besides, the imbalance of rural economy structure also contributes to the formation of dual structure and China’s high ranking in gini coefficient.Therefore, this paper argues that the most important way to increase current farmers’ income is to adjust the structure of the rural financial development, increase financial support for farmers, improve the efficiency of the rural financial development accordingly.