TITLE:
Financial Development, Urbanization, and Urban-Rural Income Disparity: Evidence Based on Chinese Provincial Data
AUTHORS:
Zhiqiang Ye, Lixia Qian, Zhang Na
KEYWORDS:
Financial Development, Urban-Rural Income Gap, Urbanization, Financial Threshold Effect
JOURNAL NAME:
Modern Economy,
Vol.9 No.1,
January
8,
2018
ABSTRACT: China’s economic development has maintained a rapid
growth trend since 1978, but the problem of imbalanced income distribution
between urban and rural residents also has been increasingly aggravated. This
paper discusses the relationship between financial development and urban-rural
income disparity and examines the impact of urbanization on the relationship
between financial development and urban-rural income disparity. Then this paper
selects the provincial panel data of 28 provinces in China from 1978 to 2014, using
GMM dynamic model and fixed effect panel model, respectively, to do the
empirical test. The results show that: 1) the imbalance of urban and rural
financial resources is exacerbated by the financial threshold effect, leading
to the fact that the financial development-measured
by scale, efficiency and structure, respectively, expand the urban-rural
income gap. 2) The
developing urbanization will widen the urban-rural income gap. However, as the
urbanization and mainly the urbanization of land is rapid in China, the
expansion effect of the increasing financial development level on the income
gap between urban and rural residents in China will be weakened with the
acceleration of urbanization based on the financial threshold effect. It
provides empirical support for the financial reform and for the assumption that
urbanization development reduces the income gap between urban and rural areas.