Abstract:

Rural development is critical to raise rural living standards and reduce income differences between urban and rural areas. Much literature has explored factors that could affect rural development, and we investigate the effects of bank presence in rural areas on rural income. Using Chinese provincial-level data from 2005 to 2017, we quantify the effects of bank presence on rural income. Specifically, we use the number of banks per town to measure bank presence and use rural income per capita of each province to measure rural income. With the ordinal least square model and dynamic panel estimation, we find that bank presence increases rural income. Rural income increases the same year with banks appear in town, and the effects of bank presence last for years on rural income. However, we do not find significant evidence that bank presence in rural areas also contributes to the reduction of the income difference between urban and rural areas.