Financial development and income inequality

Jauch, Sebastian; Watzka, Sebastian (2011): Financial development and income inequality. CESifo working paper: Fiscal Policy, Macroeconomics and Growth, 3687

Abstract

We analyze the link between financial development and income inequality for a broad unbalanced dataset of 138 developed and developing countries over the years 1960 to 2008. Using credit-to-GDP as measure of financial development, our results reject theoretical models predicting a negative impact of financial development on income inequality measured by the Gini coefficient. Controlling for country fixed effects and GDP per capita, we find that financial development has a positive effect on income inequality. These results are robust to different measures of financial development.

• Item Type: Paper (Discussion Paper)
• Faculties: Economics; Economics > Chairs > Seminar for Macroeconomics
• Subjects: 300 Social sciences > 330 Economics
• Language: English