The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach*

Wai Choi Lee (), Tsun Se Cheong, Yanrui Wu and Jianxin Wu ()
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Wai Choi Lee: School of Business The Hang Seng University of Hong Kong Hang Shin Link, Siu Lek Yuen Shatin, N.T., Hong Kong
Jianxin Wu: Department of International Trade and Economics Jinan University 601 Huangpu W Ave Guangzhou, China

Asian Economic Papers, 2019, vol. 18, issue 2, 126-141

Abstract: This paper investigates the impacts of financial development, urbanization, and globalization on income inequality in China by applying a regression-based inequality decomposition approach to panel data on Chinese provinces. Provincial data on urbanization and globalization are combined with new data collected from a unique database of financial development in China compiled at the county level. Our findings suggest that financial development, urbanization, and globalization have a positive impact on income. However, our inequality decomposition suggests that financial development may be particularly important for promoting inclusive growth, since financial development not only stimulates economic growth but is also found to be a factor that reduces inequality.

Date: 2019
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Working Paper: The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach (2017)
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