Empirical Study on the Relationship between Financial Development and Urban and Rural Residents’ Income Gap in Guangdong Province

Abstract

To explore the mutual relationship between financial development and the income gap in urban and rural residents, this paper uses the Guangdong province’s time series data since the reform and opening up for nearly 40 years, establishes the index of financial development degree and the urban and rural residents income gap, to financial development scale and development efficiency of financial development degree, with difference index to represent the urban and rural residents income gap between the rich and the poor. After the use of theoretical analysis based on the interaction mechanism between them, this essay makes an empirical analysis combined with vector auto-regressive model. The results show that the residents’ income gap between urban and rural areas of Guangdong province will be expanded with the expansion of financial development, and will be narrowed with the improvement of the efficiency of financial development. Therefore, in order to realize the resource configuration optimization, promoting fair income distribution, we should optimize the financing channels, deepen the financial system and income distribution system, and realize the financial development and narrow the gap between urban and rural residents income to reach win-win situation.