FINANCIAL STRUCTURE FOUNDATION OF THE URBAN– RURAL INCOME GAP IN CHINA: AN INVESTIGATION FROM THE PERSPECTIVE OF THE DOUBLE DUAL STRUCTURE
This article is an empirical analysis of the relations between financial structure and theurban–rural income gap (URIG) in China’s economic transition, based on the country’sdouble dual structure. We employ data of 31 provinces in China from 2001 to 2016 toempirically study the influence of financial structure on the URIG. We find an invertedU-shaped relation between financial scale and the URIG, a positive impact of urbanand rural financial structure on the URIG, and an inverted U-shaped relation betweenthe mismatch of financial resources and the URIG. These findings show that selectionof the optimal proportion of the state-owned economy through ownership reform andthe promotion of financial development and optimization of the allocation of financialresources are two effective ways to reduce the URIG.
Arellano, M., and Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The review of economic studies, 58(2), 277-297.
Baiardi, D., and Morana, C. (2018). Financial development and income distribution inequality in the euro area. Economic Modelling, 70, 40-55.
Banerjee, A. V., and Newman, A. F. (1993). Occupational choice and the process of development. Journal of political economy, 101(2), 274-298.
Benabou, R. (1996). Inequality and growth. NBER macroeconomics annual, 11, 11-74.
Benjamin, D., Brandt, L., Giles, J., & Wang, S. (2008). Income inequality during China’s economic transition. China’s great economic transformation, 729-75.
Braithwaite, J., and Braithwaite, V. (1980). The effect of income inequality and social democracy on homicide: A cross-national comparison. The British Journal of Criminology, 20(1), 45-53.
Calderón, C., and Servén, L. (2004). The effects of infrastructure development on growth and income distribution. The World Bank.
Chen, J., and Fleisher, B. M. (1996). Regional income inequality and economic growth in China. Journal of comparative economics, 22(2), 141-164.
Cheong, T. S., and Wu, Y. (2014). The impacts of structural transformation and industrial upgrading on regional inequality in China. China Economic Review, 31, 339-350.
Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., and Tsounta, E. (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund.
De Gregorio, J. (1996). Borrowing constraints, human capital accumulation, and growth. Journal of Monetary Economics, 37(1), 49-71.
De Haan, J., and Sturm, J. E. (2017). Finance and income inequality: A review and new evidence. European Journal of Political Economy, 50, 171-195.
Galor, O., and Zeira, J. (1993). Income distribution and macroeconomics. The review of economic studies, 60(1), 35-52.
Ghatak, M., and Jiang, N. N. H. (2002). A simple model of inequality, occupational choice, and development. Journal of development Economics, 69(1), 205-226.
Ghossoub, E. A., and Reed, R. R. (2017). Financial development, income inequality, and the redistributive effects of monetary policy. Journal of Development Economics, 126, 167-189.
Gimet, C., and Lagoarde-Segot, T. (2011). A closer look at financial development and income distribution. Journal of Banking & Finance, 35(7), 1698-1713.
Greenwood, J., and Jovanovic, B. (1990). Financial development, growth, and the distribution of income. Journal of political Economy, 98(5, Part 1), 1076-1107.
Hamori, S., and Hashiguchi, Y. (2012). The effect of financial deepening on inequality: Some international evidence. Journal of Asian Economics, 23(4), 353-359.
Hsieh, J., Chen, T. C., and Lin, S. C. (2019). Financial Structure, Bank Competition and Income Inequality. The North American Journal of Economics and Finance.
Jalil, A. (2012). Modeling income inequality and openness in the framework of Kuznets curve: New evidence from China. Economic Modelling, 29(2), 309-315.
Jauch, S., and Watzka, S. (2016). Financial development and income inequality: a panel data approach. Empirical Economics, 51(1), 291-314.
Johansson, A. C., and Wang, X. (2014). Financial sector policies and income inequality. China Economic Review, 31, 367-378.
Kim, D. H., and Lin, S. C. (2011). Nonlinearity in the financial development–income inequality nexus. Journal of Comparative Economics, 39(3), 310-325.
Kunieda, T., Okada, K., and Shibata, A. (2014). Finance and inequality: How does globalization change their relationship?. Macroeconomic Dynamics, 18(5), 1091-1128.
Kuznets, S. (1955). Economic growth and income inequality. The American economic review, 1-28.
Lee, W. C., Cheong, T. S., and Wu, Y. (2017). The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach (No. 651). Asian Development Bank Institute.
Lessmann, C. (2013). Foreign direct investment and regional inequality: A panel data analysis. China Economic Review, 24, 129-149.
Li, B., Hao, Y., & Chang, C. P. (2018). Does an anticorruption campaign deteriorate environmental quality? Evidence from China. Energy & Environment, 29(1), 67-94.
Li, H., Squire, L., and Zou, H. F. (1998). Explaining international and intertemporal variations in income inequality. The economic journal, 108(446), 26-43.
Li, J., and Yu, H. (2014). Income inequality and financial reform in Asia: the role of human capital. Applied Economics, 46(24), 2920-2935.
Li, Y. (2010). Analysis on the disparity in economic growth and consumption between urban sector and rural sector of China: 1978–2008. Frontiers of Economics in China, 5(4), 559-581.
Lin, F., and Fu, D. (2016). Trade, institution quality and income inequality. World Development, 77, 129-142.
Lu, M., and Chen, Z. (2004). Urbanization, Urban-Biased Economic Policies and Urban-Rural Inequality. Economic Research Journal, 6(5), 50-58.
Mah, J. S. (2013). Globalization, decentralization and income inequality: The case of China. Economic Modelling, 31, 653-658.
Molero-Simarro, R. (2017). Inequality in China revisited. The effect of functional distribution of income on urban top incomes, the urban-rural gap and the Gini index, 1978–2015. China Economic Review, 42, 101-117.
Mookerjee, R., and Kalipioni, P. (2010). Availability of financial services and income inequality: The evidence from many countries. Emerging Markets Review, 11(4), 404-408.
Mookherjee, D., and Ray, D. (2003). Persistent inequality. The Review of Economic Studies, 70(2), 369-393.
Naceur, S. B., and Zhang, R. (2016). Financial Development, Inequality and Poverty; Some International Evidence (No. 16/32). International Monetary Fund.
Seven, U., and Coskun, Y. (2016). Does financial development reduce income inequality and poverty? Evidence from emerging countries. Emerging Markets Review, 26, 34-63.
Su, C. W., Liu, T. Y., Chang, H. L., and Jiang, X. Z. (2015). Is urbanization narrowing the urban-rural income gap? A cross-regional study of China. Habitat International, 48, 79-86.
Tan, H. B., and Law, S. H. (2012). Nonlinear dynamics of the finance-inequality nexus in developing countries. The Journal of Economic Inequality, 10(4), 551-563.
Wang, C., Wan, G., and Yang, D. (2015). Income Inequality in the PRC: Trends, Determinants, and Proposed Remedies. China’s Economy: A Collection of Surveys.
Wei, H., and Zhao, C. (2012). Effects of international trade on urban-rural income gap in China. Finance & Trade Economics, 1.
Wen, J., Feng, G. F., Chang, C. P., & Feng, Z. Z. (2018). Stock liquidity and enterprise innovation: new evidence from China. The European Journal of Finance, 24(9), 683-713.
Wen, J., Yang, D., Feng, G. F., Dong, M., & Chang, C. P. (2018). Venture capital and innovation in China: The non-linear evidence. Structural Change and Economic Dynamics, 46, 148-162.
Wu, D., and Rao, P. (2017). Urbanization and income inequality in China: An empirical investigation at provincial level. Social Indicators Research, 131(1), 189-214.
Wu, X., and Perloff, J. M. (2005). China's income distribution, 1985–2001. Review of Economics and Statistics, 87(4), 763-775.
Yu, K., Xin, X., Guo, P., and Liu, X. (2011). Foreign direct investment and China's regional income inequality. Economic Modelling, 28(3), 1348-1353.
Zhang, Q., and Chen, R. (2015). Financial development and income inequality in China: An application of SVAR approach. Procedia Computer Science, 55, 774-781.
Zhang, J., Wan, G., and Jin, Y. (2007). The financial deepening-productivity nexus in China: 1987–2001. Journal of Chinese Economic and Business Studies, 5(1), 37-49.
Copyright (c) 2019 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.