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

Samuel Moon Jung and Chu-Ping C. Vijverberg

The North American Journal of Economics and Finance, 2019, vol. 48, issue C, 295-320

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.

Keywords: Income disparities; Spatial dependence; Spatial model (search for similar items in EconPapers)
JEL-codes: E01 I32 R12 C21 (search for similar items in EconPapers)
Date: 2019
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