The effect of rural finance development on farmers' income gap: A comparative study based on the data of different provinces of China

Abstract

As the economy develops, the income gap, especially the gap in the internal rural areas has become a key problem in realizing the common prosperity. The rural financial development level is connected to every aspect of rural production and it must have some effects on the rural income gap in some way. This paper chose the data from 1985 to 2009 of Jiangsu, Henan and Guangxi province as typical provinces in eastern, central and western China, to make an empirical analysis on the effect of rural financial development on farmers' income gap. The paper chose rural financial development scale and rural financial development efficiency as indicators of the financial development level and the Gini coefficient as the indicator to measure the rural income gap. The result shows that the rural financial development level narrows farmers' income gap in Jiangsu Province while the rural financial development level in Henan and Guangxi Province expands the gap. The relationship between rural financial development level and rural income gap is presenting a weak inverted U-shape curve.