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The Effect of Financial Development on Urban and Rural Income Gap

Author: WangHui
Tutor: ChenYanYun
School: Jiangxi University of Finance
Course: Regional Economics
Keywords: Income gap between urban and rural areas The scale of financial development The efficiency of financial development Empirical Analysis
CLC: F124;F224
Type: Master's thesis
Year: 2010
Downloads: 384
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Abstract

Attention and research by many scholars at home and abroad in recent years about the role and impact of financial development on economic growth, prove the existence of a correlation between financial development and economic growth. Due to the uneven development in the process of economic growth, on the one hand, on the other hand due to the differences in the distribution system, the resulting income gap, especially in the urban-rural income gap in China. Therefore, we can infer the existence of some kind of logical links between financial development and urban-rural income gap. Since the reform and opening up, along with the rapid economic development of China's urban-rural income gap is showing a trend of gradually expanding, health care, education, social security and other non-monetary factors into account, the income gap between China's urban and rural areas is already the world's highest level, all already constitute a serious obstacle of building a socialist harmonious society, at this stage of economic and social development and stability, government and academia. Widening urban-rural income gap, many of our scholars from different angles to explore the expansion of the reasons I can be summarized in the following aspects: the particular stage of economic growth or development, ownership change and institutional transformation, distribution system changes and the times assigned injustice, the urban-rural split and rural-urban interests transport, agricultural products and manufactured goods the price scissors policies, account household registration policy, and so on. Among these reasons, the financial development and the uneven development has also been mentioned, but mostly on economic growth or economic policy reasons which explain not sufficiently detailed and thorough exposition. In this paper, to the theory of financial development economics, income distribution theory, theory and extension of Kuznets Kuznets theory, detailed theoretical explanations of financial development of the urban-rural income gap, summed up the domestic and foreign scholars on financial development on income The gap between the impact point of view, three theoretical perspectives: financial conducive to the development of harmful theory of financial development, the expansion of the Kuznets theory of financial development of the income gap. The author in the process of this research, the development of the financial decomposed into two indicators of financial development regulations and financial development efficiency, urban and rural two different regions at the same time the article appeared, and further divided indicators, that the city's financial The scale of development, rural financial development scale, the efficiency of the city's financial development, rural financial development efficiency. In this paper, the financial development of the urban-rural income gap and mechanism of the process, a simple analysis of the financial factors that influence the income gap between urban and rural and non-financial factors, and then creatively put forward the financial development affects the income gap between urban and rural areas of the two paths: (1) financial development injustice → → economic growth → income distribution system, the income gap between urban and rural areas; (2) urban and rural financial development disequilibrium (rural financial development, the city's financial development) → rural the capital flows City → rural savings into the urban investment or city → urban and rural economic and financial cellaring development gap → urban-rural income disparities. These two conduction path more clearly shows the impact of the financial development of the urban-rural income gap, and laid the foundation for later empirical model. In the fourth part of the article, the author based on the front two conduction path, build two mathematical models: ① The Y = βFDS random error term γFDE u (u) ② Y = GFDS GFDE u (u is a random error term), the use of Anhui Province 1989 - 2008 time series data for the last 20 years is based, mathematical model based on the author proposes two indicators in accordance with the previously proposed decomposition of Anhui Province's financial development and urban-rural income gap between empirical testing and analysis, and draw the specific results of the empirical model. Finally empirical studies show that: ① financial development in the expansion of the income gap between urban and rural areas, the efficiency of financial development helps to narrow the income gap between urban and rural areas, but due to the effectiveness of the role of financial development efficiency was significantly less than the role of the financial scale of development effectiveness, therefore, the financial development or expansion of the income gap between urban and rural areas, which to some extent on the evidence harmful to the financial development theory; ② the scale of the city's financial development, the development of the city's financial efficiency is very obvious the income gap between urban and rural areas was expanded, and the development of rural financial efficiency to narrow the income gap between urban and rural areas but the effect is not obvious. The most part, the article summarizes the empirical conclusions and make suggestions combination of Anhui Province. Course, there are a lot of inadequacies. Not quite fully grasp the domestic and foreign literature; addition, the influencing factors in China's urban-rural income gap is particularly large, and can not be counted as a major financial factors, but the construction of the model, I keep only the financial development factors, excluding the impact of the urban-rural income gap other factors, resulting in financial development affect the effectiveness of expanding the income gap between urban and rural areas.

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