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Financial development and income inequality in China – A spatial data analysis

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  • Jung, Samuel Moon
  • Vijverberg, Chu-Ping C.

Abstract

We use provincial data of 1998–2014 to evaluate the impact of financial development on income inequality in China through spatial dependence modeling techniques. An exploratory spatial analysis for all the municipalities and provinces in China for the years of 1998, 2003, 2008 and 2013 is implemented to evaluate spatial dependence of provincial income inequalities in China. In total, 29 administrative units are used to fit an income inequality spatial model by first certifying the necessity of using a spatial model by applying Moran tests; and later the Lagrange Multiplier test is used to find a suitable spatial model. Finally, spatial panel model is estimated. Our results indicate that financial development decreases income inequality in China. Furthermore, significant spatial autocorrelation estimates appeared in the disturbance term, indicating significant non-measurable reform or policy impacts.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ecofin:v:48:y:2019:i:c:p:295-320
    DOI: 10.1016/j.najef.2019.03.001
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    More about this item

    Keywords

    Income disparities; Spatial dependence; Spatial model;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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