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Financial Development and Rural-Urban Inequality: Evidence from China

  • Xuelong Wang

    ()

    (Department of Economics, Hokkaido University)

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    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.

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P156.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 2 ()
    Pages: 1625-1639

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    Handle: RePEc:ebl:ecbull:eb-12-00129
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    1. William R. Kerr & Ramana Nanda, 2009. "Financing Constraints and Entrepreneurship," Harvard Business School Working Papers 10-013, Harvard Business School.
    2. Ross Levine & Alexey Levkov & Yona Rubinstein, 2008. "Racial Discrimination and Competition," NBER Working Papers 14273, National Bureau of Economic Research, Inc.
    3. Oded Galor & Omer Moav, 1999. "From Physical to Human Capital Accumulation: Inequality in the Process of Development," Working Papers 99-27, Brown University, Department of Economics.
    4. Salvador Perez-Moreno, 2011. "Financial development and poverty in developing countries: a causal analysis," Empirical Economics, Springer, vol. 41(1), pages 57-80, August.
    5. Damiaan Persyn & Joakim Westerlund, 2008. "Error-correction–based cointegration tests for panel data," Stata Journal, StataCorp LP, vol. 8(2), pages 232-241, June.
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