The Study On The Impact Of Financial Development On Urban-rural Income Gap In Northwestern Region

Since the reform and opening up, especially since the development of the western region, the northwestern region has achieved rapid development in both economic and social areas, and people’s living standards continue to improve. At the same time, the income gap between urban and rural residents also show a tendency to expand, the urban-rural income ratio goes up from 2.2 in 1985 to 3.3 in 2012. The continuous expansion of the income gap will have a negative impact on the harmonious and healthy development of the region both economically and socially.The five northwestern provinces, as the main focus of the western development and an important basis of the construction of the silk-road economic belt, have a very important position. To solve the problem of the income gap between urban and rural areas in northwestern region is related to national unity, the stability of the region and even the final realization of the goal of fully completing a well-off society. Finance is the core of modern economy, and the level of financial development is directly related to the economic and social development as a whole. The study of the relationship between the financial development and urban-rural income gap, as well as proposing targeted policy recommendations for the problems found in the study, is of great practical significance to promote the sustainable development of the northwestern region’s economy and social harmony and stability.Firstly this paper introduces the theories of financial development and urban-rural income gap. Then by searching the related domestic and foreign literature reviews, this paper summarizes inverted U relationship, positive correlation and negative correlation between financial development and urban-rural income gap. After that, this paper reaches the corresponding influence mechanism by summarizing the threshold effect, the non-equilibrium effect and the poverty reduction effect. On the basis of theoretical analysis and mechanism analysis, this paper analyzes the status quo of northwestern region’s financial development and urban-rural income gap combined with the actual situation of northwestern region. On this basis, by using the five northwestern provinces’ panel data during 1985-2012, by building the relevant index system that reflects financial development and urban-rural income gap and by taking every possible influential factor of urban-rural income gap into consideration,this paper conducts an empirical study.The result shows that, by using the scale of financial development and theefficiency of financial development as indicators of financial development, there is obvious inverted U relationship between financial development and urban-rural income gap in northwestern region, and financial development has a significant positive impact on the expansion of urban-rural income gap. The improvement of urbanization and the government’s financial support help narrow the urban-rural income gap in northwestern region. While the improvement of economic openness and education level and the upgrading of industrial structure help expand the urban-rural income gap.Finally, this paper analyzes the causes of the problems arising from the study,and puts forward corresponding policy suggestions to narrow the urban-rural income gap in northwestern region, including accelerating the improvement of the level of financial development in northwestern region, establishing a diversified, multi-level financial system, deepening financial system reform in northwestern region,increasing financial support for rural areas, changing the current imbalanced distribution of financial resources between urban and rural areas and so on.