A Study On The Impact Of Bank Concentration On Income Inequality

With the continuous improvement of China’s economic and financial development level,the scale of financial assets has gradually expanded,and the financial structure has been constantly adjusted.At the same time,China’s income inequality has gradually become prominent,which has attracted the attention of all walks of life.The existing literature deeply studies the impact of economic development and financial development on income inequality,especially the relationship between the expansion of financial scale and income inequality.However,there are few studies on how financial structure and banking structure affect income inequality,especially on the relationship between banking market competition and income inequality.Based on the fact that China is still a "bank-dominated" country,this paper analyzes the relationship between banking structure and income inequality from the perspective of bank concentration.First of all,this paper reviews the research on the relationship between financial sector and income inequality,trying to clarifies the impact of financial development,financial structure and bank concentration on income inequality,and review the literature on other factors affecting income inequality.Then,based on the existing theory and research,this paper analyzes the relationship between bank concentration and income inequality: reducing bank concentration is conducive to narrowing the income gap of residents,and banking concentration affects income inequality by affecting entrepreneurship.Thirdly,using the sample data of 24 provinces in China from 2005 to 2017,this paper constructs a mediation effect model and uses GMM method to alleviate endogeneity,so as to empirically analyze the relationship between bank concentration and income inequality.The proportion of total assets of state-owned banks(CR5)and Herfindahl-Hirschman Asset Index(HHI)are selected to measure the concentration of bank industry.By referring to Tian(2012),we calculate the intra-provincial Gini coefficient to measure income inequality,the explained variable.The proportion of private enterprises and self-employed individuals is used as an alternative indicator of the entrepreneurial activity of small and medium-sized enterprises,and also consider some marco factors that affect income inequality.Finally,this paper puts forward some specific policy suggestions to improve income inequality in China.The empirical results show that:(1)there is a significant positive correlation between bank concentration and Gini coefficient,and reducing bank concentration helps to alleviate income inequality;(2)encouraging entrepreneurship helps to narrow the income gap of residents;(3)high bank concentration may not be conducive to stimulate entrepreneurship,and then may expand the income gap.Based on the result that the higher concentration of bank industry will probably expand the income gap of residents,and reduce bank concentration will improve the level of entrepreneurial activity and thus alleviating income inequality,this paper puts forward policy suggestions to improve income inequality from the perspective of optimizing the structure of bank industry and encouraging entrepreneurship.