Abstract: Inclusive finance reduces urban-rural income gap through the formation, allocation and technological innovation of rural capital. Based on the provincial panel data of China from 2005 to 2014, this paper examines the influence of inclusive finance on urban - rural income gap based on nonlinear and linear panel model. The results show that at the national level, the impact of inclusive finance on urban-rural income gap is characterized by the first expansion and then reduction non-linear characteristic; the impact of the urban-rural income gap in the eastern region is characterized by the dynamic characteristic of the slowdown after the first increase, the impact on the central region is characterized by a continual widening linear characteristic and the influence of inclusive finance on urban-rural income gap in western China is not significant. The degree of development of inclusive finance and the escape of rural funds to non-agricultural industries or industries are the bottlenecks that constrain inclusive finance to narrow the urban-rural income gap. Therefore, the formulation of inclusive financial policies should be planned in an all-round way and act according to circumstances, and try to reduce the threshold of access to financial services for rural residents and township enterprises.

Key words: inclusive finance, urban-rural income gap, panel model