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441. Financial Development and Income Inequality in Rural China 1991-2000

Author:
Zhicheng Liang
Publication Date:
09-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Financial development can exert a significant influence on the distribution of income. In this paper, using Chinese provincial data over the period of 1991-2000 and applying the generalized method of moment (GMM) techniques, we investigate the relationship between finance and inequality in rural China by testing alternative existing theories concerning the finance-inequality nexus. A negative and linear relationship between finance and inequality is found in our estimations. The empirical results show that financial development significantly reduces income inequality in post-reform rural China.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

442. Fiscal Decentralization and Political Centralization in China: Implications for Growth and Inequality

Author:
Xiaobo Zhang
Publication Date:
09-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
China's current fiscal system is largely decentralized while its governance structure is rather centralized with strong top-down mandates and a homogenous governance structure. Due to large differences in initial economic structures and revenue bases, the implicit tax rate and fiscal burdens to support the functioning of local government vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on preexisting or new firms to finance public goods provision, thereby creating a healthy investment environment for the nonfarm sector to grow. In contrast, regions with agriculture as the major economic activity have little resources left for public investment after paying the expenses of bureaucracy. Consequently, differences in economic structures and fiscal burdens may translate into a widening regional gap.
Topic:
Development, Economics, and Politics
Political Geography:
China and Asia

443. Financial Development, Growth, and Regional Disparity in Post-Reform China

Author:
Zhicheng Liang
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Deepening financial development and rapid economic growth in China have been accompanied by widening income disparity between the coastal and inland regions. In this paper, by employing panel dataset for 29 Chinese provinces over the period of 1990-2001 and applying the generalized method of moment (GMM) techniques, we examine the impacts of financial development on China's growth performance. Our empirical results show that financial development significantly promotes economic growth in coastal regions but not in the inland regions; the weak finance-growth nexus in inland provinces may aggravate China's regional disparities.
Topic:
Conflict Resolution, Development, and Economics
Political Geography:
China and Asia

444. Spatial Convergence in China: 1952-99

Author:
Geoffrey J.D. Hewings, Dong Guo, and Patricio Aroca
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The purpose of this paper is to examine the convergence process in China by taking into account the spatial interaction between factors. The paper shows that there has been a dramatic increase in the spatial dependence of China's per capita GDP in the last 20 years. The consequence of space plays an important role, which is reflected in the influence of a neighbour's condition on the mobility of a province's income distribution from one category to another. The dynamics of the process showed evidence that China's distribution has gone from one of convergence to stratification, and from stratification to polarization.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

445. Financial Sector Development and Growth: The Chinese Experience

Author:
Mingming Zhou and Iftekhar Hasan
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
China and Asia

446. Excess Credit and the South Korean Crisis

Author:
Bassam A. Fattouh and Panicos O. Demetriades
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We provide a novel empirical analysis of the South Korean credit market that reveals large volumes of excess credit since the late 1970s, indicating that a sizeable proportion of total credit was being used to refinance unprofitable projects. Our findings are consistent with theoretical literature that suggests that soft budget constraints and overborrowing were significant factors behind the Korean financial crisis of 1997-98.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Asia, South Korea, and Korea

447. Development of Financial Intermediation and the Dynamics of Rural-Urban Inequality: China, 1978-98

Author:
Qi Zhang, Mingxing Liu, and Yiu Por Chen
Publication Date:
06-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Using China as a test case, this paper empirically investigates how the development of financial intermediation affects rural-urban income disparity (RUID). Using 20-year province level panel data, we find that the level of financial development is positively correlated with RUID. Examining two subperiods, 1978-88 and 1989-98, we test several competing hypotheses that may affect RUID. We find that the increase of RUID may be explained by fiscal policy during the first period and financial intermediates during the second period. In addition, we show that the direction of the Kuznets effect on RUID is sensitive to changes in government development policies. The rural development policies during the first period may have enhanced the rural development and reduced RUID. However, the financial intermediary policy during the second period focused on urban development and increased both urban growth and intra-urban inequalities, thus leading to an increase in RUID. Finally, we show that RUID is insensitive to the provincial industrial structure (the share of primary industry in GDP). These results are consistent with the traditional urban-bias hypothesis and are robust to the inclusion of controls for endogeneity issues. This study adds to the economic inequality literature by clarifying the effects of government policies on the underlying dynamics on convergent and divergent effects on rural-urban inequality.
Topic:
Development, Economics, and Government
Political Geography:
China and Asia

448. Poverty Accounting by Factor Components: With an Empirical Illustration Using Chinese Data

Author:
Guanghua Wan
Publication Date:
06-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The purpose of this paper is to develop two poverty decomposition frameworks and to illustrate their applicability. A given level of poverty is broadly decomposed into an overall inequality component and an overall endowment component in terms of income or consumption determinants or input factors. These components are further decomposed into finer components associated with individual inputs. Also, a change in poverty is decomposed into components attributable to the growth and redistributions of factor inputs. An empirical illustration using Chinese data highlights the importance of factor redistributions in determining poverty levels and poverty changes in rural China.
Topic:
Development, Economics, and Poverty
Political Geography:
China and Asia

449. Asia's Labour-Driven Economic Development, Flying-Geese Style: An Unprecedented Opportunity for the Poor to Rise?

Author:
Terutomo Ozawa
Publication Date:
06-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The notion of 'shared growth' was introduced by the World Bank in recognition of East Asia's rapid growth accompanied by poverty reduction. It emphasizes the criticality of pro-poor policies and institutional setups in the fast-developing East Asian economies. The efforts of these individual countries are, however, a necessary but not sufficient condition (explanation). There is a more essential, underlying region-wide mechanism that simultaneously promotes regionalized growth and specifically favours Asia's working mass of unskilled labour. Such an efficacious mechanism is posited in the 'flying-geese paradigm of comparative advantage recycling in labour-intensive goods'. The paper argues that a number of favourable factors have fortuitously coalesced to engender a considerably favourable condition for Asia's rapid catch-up growth in which unskilled labour (the poor) can participate as their countries' most vital input in labour-driven development.
Topic:
Development, Economics, and Poverty
Political Geography:
East Asia and Asia

450. Threshold Estimation on the Globalization-Poverty Nexus: Evidence from China

Author:
Zhicheng Liang
Publication Date:
06-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
China has experienced rapid integration into the global economy and achieved remarkable progress in poverty reduction over the last two decades. In this paper, by employing panel data covering twenty-five Chinese provinces over the period of 1986- 2002, and applying the endogenous threshold regression techniques, we empirically investigate the globalization-poverty nexus in China, paying particular attention to the nonlinearity of the impact of globalization on the poor. Estimation results provide strong evidence to suggest that there exists a threshold in the relationship between globalization and poverty: globalization is good for the poor only after the economy has reached a certain threshold level of globalization.
Topic:
Economics, Globalization, and Poverty
Political Geography:
China and Asia