Date of Degree


Document Type


Degree Name





Chu-Ping C. Vijverberg

Committee Members

Wim Vijverberg

Tao Wang

Subject Categories

Finance | Growth and Development | Income Distribution


Financial development; Income disparities; GMM system estimator; Spatial dependence; Spatial Model


This dissertation consists of three essays of original research. Chapter 1 is a survey of the literature on the theoretical and empirical interactions among financial development, economic growth, and income inequality.

Chapter 2 describes empirical research on the relationship between financial development and income inequality based on Generalized Method of Moments (GMM) method using a Chinese provincial dataset between 1998 and 2014. The empirical findings support the notion that well-developed financial markets increase income inequality in China. After adding a year dummy for 2001 to examine the impact of China’s entry into the World Trade Organization, which caused the financial system to deepen due to a surge in banking competition in China, positive impacts of financial development on income inequality increased.

Chapter 3 empirically investigates the association between financial development and income inequality based on spatial data analysis. As is well known, provincial Gini coefficients are not available for a few provinces and for certain years. To deal with this missing data, a GMM regression was estimated by using available data to obtain predicted values for the missing observations. An exploratory spatial analysis of 29 administrative units in China showed spatial dependence of provincial income inequalities. Finally, a spatial panel model was estimated. The empirical results reveal that financial development decreases income inequality in China. Furthermore, the estimation exhibited significant spatial autocorrelation estimates with spatial dependence appearing in the disturbance term, indicating significant non-measurable reform or policy impacts.

Chapter 4 reconciles the difference between Chapter 2 and Chapter 3. Empirical findings proposed in Chapter 2 based on the system GMM estimator suggest a positive relationship between financial development and income inequality, while findings suggested in Chapter 3 based on a spatial panel model present the negative impact of financial development on income inequality.