Rural financial development, spatial spillover, and poverty reduction: evidence from China

Abstract

Rural financial development is deemed essential for eliminating poverty. In China, successive governments have initiated a series of financial development plans to reduce poverty since the launch of economic reform in the late 1970s. However, there is a rising concern about whether financial development can reduce poverty in China. This study uses a panel dataset of 30 provinces (out of 31) in mainland China from 1997 to 2015 to examine the effect of rural financial development on poverty reduction. We employ a spatial panel model to investigate whether rural financial development has a positive spatial spillover effect. Moreover, we use the instrumental variable method to address the possible bidirectional causal effect between rural financial development and poverty reduction. Our study confirms that rural financial development does reduce poverty and simultaneously widen the urban-rural income gap. We further find that rural financial development has a positive spatial spillover effect on poverty alleviation and that the conventional panel model (e.g., fixed effects method) may underestimate the effect of rural financial development, as it ignores the spatial spillover effect.

Financial deepening does cause income growth of rural residents: Insights from the relationship between government and market in China

“…However, in the case of China's A-share listed companies, when categorized according to their SEC industry sectors, agro-related listed companies only represent approximately 1 % of China's total A-share market, and the scale of financing is limited. Additionally, rural finance in China rarely encompasses stock trading activities [ 29 ].…”

“…Some scholars gauge financial deepening by assessing the ratio of a financial indicator to GDP [ [31] , [32] , [33] ]. In measuring rural financial deepening, Zhu et al [ 29 ] employ indicators related to both financial scale and financial efficiency.…”

Factors Affecting Endogenous Income of Informal Laborers Suffering Economically Social Exclusion in Vietnam’s Northern Mountainous Area

“…The capital resources investing in the agricultural production process influence the development of livelihood in rural areas (Zhu et al, 2021). However, these resources are relatively low as…”

Credit market development and agricultural production in selected African countries

“…Agricultural policies (Shikur 2020a), industrial policies (Shikur et al 2020, Shikur 2020b, irrigation utilization (Shikur 2021a,b), adoption of technology (Shikur 2020a), information asymmetry (Habte et al 2016), sector linkage (Habte et al 2017(Habte et al , 2020, market coordination (Shikur 2021a,b), agricultural product export (Shikur 2022a,b), and labor and capital supply (Shikur 2022c) are cited as influential factors related to agricultural production and productivity at country level. A large body of literature argues that agricultural production substantially depends on climate change (UNFCCC 2007) as well as credit market development (Badibanga, Ulimwengu 2019, Zhu et al 2021). Thus, this study is useful to contribute to the scarce literature on the role of climate change and credit market development played in agricultural production.…”

“…Credit market development substantially determines agricultural growth and productivity by increasing farmers' purchasing power of agricultural technologies and resource allocation efficiency (Anetor et al 2016, Badibanga, Ulimwengu 2019, Zhu et al 2021). Thus, subsidized credit loans have widely been employed in many developing countries to reduce poverty (Chandio et al 2020, Kaya, Kadanalı 2021.…”