Scandinavian Working Papers in Economics

Stockholm School of Economics Asia Working Paper Series,
Stockholm School of Economics, Stockholm China Economic Research Institute

No 2015-35: Financial Liberalization and Urbanization

Anders C. Johansson () and Xun Wang ()
Additional contact information
Anders C. Johansson: Stockholm China Economic Research Institute, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Xun Wang: Stockholm China Economic Research Institute, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: This paper analyzes the relationship between financial liberalization and urbanization. We conjecture that liberalizing financial policies enables the process of economic structural change and that this change results in an increased demand for labor in the predominantly urban service industry, Using different identification strategies and a large country sample, we find that financial liberalization is positively associated with urbanization. When controlling for the robustness of determinants as well as potential endogeneity, financial liberalization is still significantly and positively related to urbanization. We also identify the individual financial policies that are most strongly associated with urbanization, namely interest rate liberalization, strengthening of competition in the banking sector, credit control liberalization, and a decrease in the entry barriers to the domestic financial industry. Our findings have implications for countries such as China, where policymakers hope that urbanization will be a key driver of future economic growth.

Keywords: Financial liberalization; Urbanization; Structural change

JEL-codes: G00; O11; O16; O18; P25; R23

33 pages, April 30, 2015

Full text files

hascer2015-035.pdf PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to NanHee Lee ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:32:38.