The Impact Of China's Bank Credit Resource Allocation On Urban-rural Income Gap

China’s economy has developed rapidly since the reform and opening up.People’s income level has been increasing,but the income inequality has become more and more serious.Since 1992 the urban-rural income ratio has been reached 2.5 or more high,by the end of 2014 the urban-rural income ratio reached 2.92.This aroused great concern of the income distribution.At the same time,scholars began to study the relationship between financial development and income gap.In China,bank is the core of the financial system.Credit is the most important factor of the economic development,and made outstanding contribution to the development of residents’ income.Because of inadequate credit market,credit rationing,serious interest rate controls often occurs,leading to the emergence of regional centralized credit resources,urban bias,and low efficiency.They directly affect the development of regional economy,and then affect the income gap.Based on this,this paper studies the effect of bank credit on the income gap between urban and rural areas.Firstly,on the basis of financial development,bank credit resource allocation and the income gap theory,we analyze the bank credit resources allocation’s mechanism of influence on urban-rural income gap.In theory,credit allocation of resources through the following three factors affect the income gap between urban and rural residents: credit threshold,credit resource allocation structure(urban-rural dichotomy),credit efficiency.Then we analyze the changes of credit market and the allocation of credit resources in China.Simultaneously the paper analysis the current situation of the income gap between urban and rural areas.Finally,based on the panel data of 31 provinces,municipalities and autonomous regions of China in 1995-2014;we build a model to test the effect of bank credit resource allocation on the income gap.In the empirical study,the panel data is tested on root of unity and cointegration,in order to prevent spurious regression.We select the form of data model by making Covariance test and Hausman test.Finally author analysis the causes and effect of regression results.The conclusions drawn from the study are as follows: Firstly,the credit’s development in China and the income gap between urban and rural residents have a positive relationship,the effect is most apparent in the central region.Secondly,the unbalanced distribution of the bank credit is the important cause to increase income gap between urban and rural areas.Third,improving the efficiency of bank credit is helpful to narrow the income gap between urban and rural areas.This effect is mainly influenced by economic growth factors.Forth,increase the proportion of rural credit can effectively reduce the income gap.Therefore,the expansion of bank credit scale at the same time,more attention should be paid to enhance the efficiency of credit allocation,and strengthen credit support to rural areas,so as to narrow the income gap between urban and rural areas.