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Does Credit Expansion Promote Common Prosperity? Evidence from County-Level Urban–Rural Income Disparities

Author

Listed:
  • Ziyun Wang

    (Hainan Vocational University of Science and Technology)

  • Zhe Li

    (City University of Macau)

  • Di Hu

    (City University of Macau)

  • Wushen Huang

    (City University of Macau)

  • Wenze Xiong

    (University of Auckland, School of Business)

Abstract

The focus of common prosperity is to narrow the income gap between urban and rural residents. However, whether the credit expansion really benefits the rural and low-income groups, the existing research still lacks more detailed evidence. This study uses county panel data to compare the different effects of per capita loan expansion on the incomes of urban residents and rural residents. In this paper, the two-way fixed effect model is used to control the county fixed effect and the year fixed effect. At the same time, this paper uses a stacked uniform framework to put urban and rural samples in the same regression, and directly compares the elastic differences between urban and rural income and credit. The results show that the marginal effect of credit expansion on rural income is obviously weaker than that on urban income. Robustness test generally supports the conclusion that “towns benefit and rural areas are suppressed”. Therefore, if more credit resources flow to urban sectors or capital-intensive sectors, financial expansion may increase the difference in income responses between urban and rural areas, thus constraining the goal of common prosperity.

Suggested Citation

  • Ziyun Wang & Zhe Li & Di Hu & Wushen Huang & Wenze Xiong, 2026. "Does Credit Expansion Promote Common Prosperity? Evidence from County-Level Urban–Rural Income Disparities," Advances in Economics, Business and Management Research,, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6239-672-2_32
    DOI: 10.2991/978-94-6239-672-2_32
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