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Financial Development And Income Distribution: A System Gmm Panel Analysis With Application To Urban China

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  • Zhicheng Liang

    ()
    (University of Auvergne)

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    Abstract

    Financial development has strongly influenced the pattern of income distribution in post-reform China. In this paper, using Chinese provincial data over the period of 1986-2000 and applying the Generalized Method of Moment (GMM) techniques, we investigate the finance-inequality nexus in urban China. Empirical results show that China¡¯s financial development significantly helps to reduce urban income inequality. However, these positive distributional gains from financial sector development have been severely offset by the increased urban unemployment and massive layoffs brought about by the implementation of radical urban reforms and the restructuring of state-owned enterprises.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 31 (2006)
    Issue (Month): 2 (December)
    Pages: 1-21

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    Handle: RePEc:jed:journl:v:31:y:2006:i:2:p:1-21

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    Related research

    Keywords: Financial Development; Income Inequality; Chinese Economy;

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    References

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    1. Clarke, George & Xu, Lixin Colin & Zou, Heng-fu, 2003. "Finance and income inequality : test of alternative theories," Policy Research Working Paper Series 2984, The World Bank.
    2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
    3. Beck, T.H.L. & Levine, R. & Loayza, N., 2000. "Finance and the sources of growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125520, Tilburg University.
    4. Xin Meng, 2004. "Economic Restructuring and Income Inequality in Urban China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(3), pages 357-379, 09.
    5. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
    6. Meng, Xin & Gregory, Robert & Wang, Youjuan, 2005. "Poverty, inequality, and growth in urban China, 1986-2000," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 710-729, December.
    7. Knight, John B & Song, Lina, 1991. "The Determinants of Urban Income Inequality in China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(2), pages 123-54, May.
    8. Gibson, John & Huang, Jikun & Rozelle, Scott, 2001. "Improving Estimates Of Inequality And Poverty From Urban China'S Household Income And Expenditure Survey," Working Papers 11989, University of California, Davis, Department of Agricultural and Resource Economics.
    9. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
    10. Khan, Azizur Rahman & Riskin, Carl, 2001. "Inequality and Poverty in China in the Age of Globalization," OUP Catalogue, Oxford University Press, number 9780195136494.
    11. Aaberge, Rolf & Li, Xuezeng, 1997. "The Trend in Urban Income Inequality in Two Chinese Provinces, 1986-90," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(3), pages 335-55, September.
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    Cited by:
    1. Çoban, Serap & Topcu, Mert, 2013. "The nexus between financial development and energy consumption in the EU: A dynamic panel data analysis," Energy Economics, Elsevier, vol. 39(C), pages 81-88.
    2. Caroline DAYMON, 2012. "Ouverture Commerciale, Inégalités De Revenu Et Répartition Salariale Dans Les Pays Du Sud Et De L’Est De La Méditerranée," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 81-98.
    3. Kim, Dong-Hyeon & Lin, Shu-Chin, 2011. "Nonlinearity in the financial development–income inequality nexus," Journal of Comparative Economics, Elsevier, vol. 39(3), pages 310-325, September.
    4. Jalil, Abdul, 2012. "Modeling income inequality and openness in the framework of Kuznets curve: New evidence from China," Economic Modelling, Elsevier, vol. 29(2), pages 309-315.

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