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Financial Development and Rural-Urban Inequality: Evidence from China

Author

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  • Xuelong Wang

    (Department of Economics, Hokkaido University)

Abstract

This paper assesses the impacts of financial development on rural-urban inequality with the panel data of China's 31 provinces. We find that credit service would deteriorate income distribution if it is only available to the rich people. But when the credit coverage becomes wider, finance may help to reduce income inequality. In addition, finance plays different roles at different stages of economic development. At the starting stage of economic growth, when physical capital is the engine of economic development, financial development could reduce income inequality. But in a mature economy, where the return to human capital is much higher, financial development may increase income inequality.

Suggested Citation

  • Xuelong Wang, 2012. "Financial Development and Rural-Urban Inequality: Evidence from China," Economics Bulletin, AccessEcon, vol. 32(2), pages 1625-1639.
    • Handle: RePEc:ebl:ecbull:eb-12-00129
    as

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    References listed on IDEAS

    as
    1. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1001-1026.
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    4. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 311-335.
    5. Kerr, William R. & Nanda, Ramana, 2009. "Democratizing entry: Banking deregulations, financing constraints, and entrepreneurship," Journal of Financial Economics, Elsevier, vol. 94(1), pages 124-149, October.
    6. Damiaan Persyn & Joakim Westerlund, 2008. "Error-correction–based cointegration tests for panel data," Stata Journal, StataCorp LP, vol. 8(2), pages 232-241, June.
    7. William Kerr & Ramana Nanda, 2009. "Financing Constraints and Entrepreneurship," NBER Working Papers 15498, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jung, Samuel Moon & Vijverberg, Chu-Ping C., 2019. "Financial development and income inequality in China – A spatial data analysis," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 295-320.
    2. Mohamed Salah Mansour & Miriam Wendel, 2015. "Finance and Inequality – Evidence from East Asia," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 3(3), pages 1-16.

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    More about this item

    Keywords

    Financial Development; Rural-urban inequality; Income Inequality; Credit;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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