Financial Development and Rural-Urban Inequality: Evidence from China

Xuelong Wang ()
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Xuelong Wang: Department of Economics, Hokkaido University

Economics Bulletin, 2012, vol. 32, issue 2, 1625-1639

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.

Keywords: Financial Development; Rural-urban inequality; Income Inequality; Credit (search for similar items in EconPapers)
JEL-codes: G1 O2 (search for similar items in EconPapers)
Date: 2012-05-31
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Citations: View citations in EconPapers (2)

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