Development of Financial Intermediation and the Dynamics of Urban–Rural Disparity in China, 1978–1998

Chen Y. P., Liu M. and Zhang Q. Development of financial intermediation and the dynamics of urban–rural disparity in China, 1978–1998, Regional Studies. This paper focuses on the impacts of financial intermediation development on the urban–rural income disparity (URID) in China. Using a twenty-year province-level panel data set from 1978 to 1998, it is found that the change of URID may be explained by fiscal policy during the early reform period (1978–1989) and financial intermediates during the later reform period (1990–1998). In addition, it is shown that the direction the Kuznets effect, an inverted 'U'-shaped relationship between per-capita gross domestic product and URID, is sensitive to changes in government development policies. This study adds to the spatial economic inequality literature by clarifying the effects of urban-biased financial intermediation policy on the underlying dynamics of convergent and divergent effects on urban–rural inequality.