The Impact Of Rural Credit Cooperative Reform On Income Inequality

This thesis exploits CHNS micro data to examine the impact of Rural Credit Cooperative (RCC) reform on income inequality and find its mechanism.Firstly, we introduce the present background of RCC reform and Chinese income inequality, following which we point out the significance of the topic. We review the broad literature and make arrangements of the structure and contents of the thesis and point out the contributions.Then we look back into the history of RCC reform, define the concept of income inequality, and build up the relation between RCC reform and income inequality.Secondly, we give series of empirical tests on the effects of RCC reform on income inequality. We measure income inequality indices based on division of groups and use difference-in-difference specification to assess the relation between RCC reform and income distribution. We assess the impact of RCC reform on different percentiles of income distribution, income inequality indices of people involved in agricultural or non-agricultural work and income inequality indices of urban or rural people. We also assess the dynamic impact of RCC reform on income inequality indices. The results show that RCC reform tightened the distribution of income by boosting incomes in the lower part of the income distribution and by boosting incomes of non-agriculture workers of rural area. The impact of RCC reform lags behind itself. The impact of RCC reform was more significant in those provinces where financial competition were more intense and among those RCC of which the performance is poorer at the beginning of the reform.Thirdly, we examine three potential channels through which RCC reform may decreased income inequality. We find that RCC reform tightened the distribution of income by supporting the self-employed. But education investment does not directly account for the impact of RCC reform on the distribution of income. RCC reform tightened the distribution of income by increasing the relative rates and working hours of low-skill workers.Fourthly, we give some recommendations and directions for further studies.