Financial Development and Urban-rural Income Gap: Empirical Analysis Based on the Panel Data of Western Region of China

With the provincial panel data of the western region of China from 2000 to 2009, this paper establishes a regression model and uses pooled-LS analysis and MCMC algorithm which based on Bayesian linear regression theory to empirical analysis the financial development in the western region of China upon the urban-rural income gap. The result shows that the development of financial intermediation widens the income gap of urban-rural, however, the development of insurance market has an opposite impact on the urban-rural income gap. At last, this paper explains the reasons behind this and some suggestions are given here.