Financial development and population growth: Evidence from bank concentration in China

Using 288 cities in China from 2000 to 2018, we show that a one-standard-deviation increase in bank concentration is associated with 7.9% lower population growth relative to the mean. This effect holds robust after controlling for city characteristics. Cities with higher bank concentration have less entrepreneurship and labor income. We use China's 2009 bank deregulation as a quasinatural experiment, and find that the shock leads to significant increases in population growth for cities with new entry of joint-stock banks and city commercial banks. We argue the deregulation increases credit supply, which relieves local households' financial constraints and improves population growth.