Abstract
We examine the relationship between urban–rural income disparities and development in a panel data set of 30 provinces and regional subsets of China during the period of 1978 to 2006. There is an inverted-U relationship between the urban–rural income gap and per capita Gross Domestic Product (GDP). Financial development by scale widens the urban–rural income gap in all regional samples, while financial sector efficiency and rural bank loans may reduce it in some regions. Government spending raises the urban–rural income gap as well. We also examine the effects of urbanization, openness and education.
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