An empirical analysis of the impact of financial development on the income gap between urban and rural residents in China - based on the PVAR model

Abstract

Although the level of China's financial industry has developed rapidly, but the domestic problem of urban-rural development imbalance is becoming more and more serious, which has formed a serious obstacle to the development and progress of social economy. In order to explore the relationship between the level of China’s financial development capacity and the income gap between urban and rural residents, this paper surveys relevant data from 30 provinces, municipalities and regions in a total of 17 years from 2002 to 2018, and introduces the income gap between urban and rural residents, the scale of financial development, and efficiency. Established a PVAR model based on related variables such as financial development structure, and then conducted co-integration test, Granger causality test, GMM estimation, impulse response and variance decomposition. The empirical results show that there is a long-term equilibrium relationship between various variables, and the urban-rural income gap It is the Granger reason for the scale of financial development, but there is no reverse causality. Through dynamic analysis, it is found that the urban-rural income gap is mainly affected by its own reasons. The scale of financial development can narrow the urban-rural income gap to a certain extent, and the efficiency of financial development is to a certain extent. Will widen the income gap between urban and rural areas, and the explanatory effect of the financial development structure can be ignored.