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BANK COMPETITION, FINANCIAL DEVELOPMENT, AND INCOME INEQUALITY
Author(s) -
Fu Zhe,
Xi Dan,
Xu Jia
Publication year - 2021
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12481
Subject(s) - economics , cournot competition , financial sector development , deregulation , competition (biology) , economic inequality , inequality , financial deepening , financial sector , macroeconomics , monetary economics , finance , financial intermediary , microeconomics , mathematical analysis , mathematics , biology , ecology
Income inequality rises with financial development initially and then drops. We reach this conclusion by numerically solving a heterogeneous agent model parameterized to the Chinese economy. The model features a banking sector with Cournot competition, and the process of financial development in the model economy begins with the deregulation of the banking sector. Based on regressions with the fixed effects and the system generalized method of moments, the empirical analysis also suggests an inverted‐U relationship between income inequality and financial development using provincial data from China. ( JEL E25, G21, G28)