Spatial Agglomeration Effect of Multidimensional Poverty and Spatial Spillover Effect of Financial Development on Poverty Reduction: Empirical Evidence from China

Since the reform and opening-up, China has formulated a series of poverty reduction policies, has successfully solved the problem of food and clothing for hundreds of millions of rural poor people, and has become the country with the most poverty reduction population in the world. Among many poverty reduction policies, financial development has been playing an important role. Much literature has proved that the poverty reduction effect of financial development comes not only from its direct role in the redistribution of capital but also from the indirect role resulting from the promotion of economic growth and the adjustment to income distribution. However, we find that when discussing how to better play the role of financial development in poverty reduction, the existing researches generally ignore the analysis of the characteristics of poverty itself, especially its spatial distribution characteristics. Due to the typical regional imbalance characteristics of China’s economic development, the exploration of spatial characteristics of poverty helps to not only deepen the understanding of poverty, but also better play the role of financial development in poverty reduction. Based on the above consideration, this paper focuses on analyzing multidimensional characteristics of rural poverty and its spatial distribution characteristics, and explores the spatial effect of financial poverty reduction. Using provincial panel data from 1999 to 2014 and spatial econometric model, and with the setting of three weight matrices of geographic distance weight, economic distance weight and nested weight, this paper analyzes the spatial distribution characteristics of income poverty, education poverty and medical poverty, and then examines the spatial effect of financial poverty reduction. It shows that no matter which weight matrix is adopted, income poverty, education poverty and medical poverty show significant spatial positive correlation, meaning that poverty distribution has a typical ‘poor-poor’ agglomeration characteristic. This feature actually reveals the imbalance of China’s regional development from a perspective of multidimensional poverty. Further studies find that financial poverty reduction shows a significant spatial spillover effect. But as for the poverty of public services like medical poverty, its improvement mainly depends on governmental fiscal expenditure and local economic development level. Compared with the previous research, the possible contributions of this paper are as follows: firstly, this paper explores the spatial distribution characteristics of poverty from a perspective of multidimensional poverty and provides empirical evidence for the pooled characteristics of poverty. Secondly, based on the distribution characteristics of poverty, we use the spatial econometric model to find that financial development can effectively alleviate the spatial agglomeration effect of poverty. This empirical result shows that the existing literature may underestimate the financial role in poverty reduction.