Economic Growth, Financial Development, and Income Inequality

Park, Donghyun; Shin, Kwanho

doi:10.1080/1540496x.2017.1333958

Cited by 77 publications

(34 citation statements)

References 25 publications

(8 reference statements)

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“…Jauch and Watzka (2016) argued that debtors would benefit from high inflation due to a reduction in their debt obligation, as most contracts are written in nominal terms. That relationship was also found in the study of Park and Shin (2017). On the other hand, the government expenditure-GDP ratio was positively associated with income inequality.…”

Section: Estimation Resultssupporting

confidence: 73%

“…In addition, various empirical studies found a non-linearity in the relationship between financial development and income inequality (Kim and Lin 2011; Park and Shin 2017; Younsi and Bechtini 2018; Zhang and Chen 2015). Park and Shin (2017) confirmed that the impact of financial development on income inequality varied depending on the level of financial development. At the early stage of financial development, the development of the financial sector alleviated income inequality.…”

Section: An Overview Of the Literaturementioning

confidence: 55%

“…In relation to various finance-inequality linkages, scholars have also been motivated by different types of proxies for financial development. Various proxies for financial development have been proposed, including the domestic credit to private sector-GDP ratio (Sehrawat and Giri 2015;Batuo et al 2010;Law et al 2014;Park and Shin 2017); the share of market capitalization-to-GDP ratio (Sehrawat and Giri 2015;Park and Shin 2017); deposit money in banks as a share of GDP (Kim and Lin 2011; Kappel 2010), among others. As such, it is noticeable that the use of proxies for financial development influences the interpretation of its influence on the finance-inequality nexus.…”

Section: An Overview Of the Literaturementioning

confidence: 99%

“…In addition, a theoretical guide to the measurement of financial development has not been properly developed, although market-based and/or bank-based indicators are commonly used in empirical studies. Various proxies for financial development have been utilized, including the domestic credit to private sector-GDP ratio (Sehrawat and Giri 2015;Batuo et al 2010;Law et al 2014;Park and Shin 2017); the share of market capitalization-to-GDP ratio (Sehrawat and Giri 2015;Park and Shin 2017); and deposit money banks as a share of GDP (Kim and Lin 2011;Kappel 2010), among others. As such, the use of various proxies can influence the findings of empirical studies of the finance-inequality nexus.…”

Section: Introductionmentioning

confidence: 99%

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Financial Development and Income Inequality in Emerging Markets: A New Approach

Nguyen

et al. 2019

JRFM

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Financial development has been considered an efficient and effective mechanism for the sustainable economic growth and development of emerging markets in past decades. However, various concerns have emerged in relation to the influences of financial sector development on income inequality. It is the claim of this paper that findings from the current literature are incomplete. This is because various proxies have been utilized inconsistently for both financial development and income inequality in previous empirical studies. This study extends the current literature on this important finance–inequality nexus by examining a sample of 21 emerging countries for the period of 1961–2017. Various estimation techniques were employed with the aim of ensuring robust findings. Findings from this paper confirm the existence of an inverted U-curve relationship between financial development and income inequality, implying that income inequality may rise at the early stage of financial development and fall after a certain level is achieved. Policy implications have emerged from the findings of this study.

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Section: Estimation Resultssupporting

confidence: 73%

Section: An Overview Of the Literaturementioning

confidence: 55%

Section: An Overview Of the Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Financial Development and Income Inequality in Emerging Markets: A New Approach

Nguyen

et al. 2019

JRFM

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“…In addition, this paper notes that better access to savings unequivocally reduces poverty. Park and Shin (2017) concluded that, up to a point, the development of the financial sector has contributed to a decrease in income inequality. However as the development of the financial sector has continued, it contributed to increased income inequality.…”

Section: Literature Reviewmentioning

confidence: 99%

Does financial inclusion alleviate household poverty? Empirical evidence from Indonesia

Dawood¹,

Pratama²,

Masbar³

et al. 2019

Economics &Amp; Sociology

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This study's contribution to literature is presenting empirical evidence on the impact of financial inclusion, meaning elimination of barriers to accessing financial services, on poverty at the household level in developing countries, using Indonesia as a case study. This is a significant problem for developing countries such as Indonesia, which faces high poverty, even though it has achieved rapid financial development. Using the Binary Logistic (Logit) model and data from approximately 300,000 households from the 2017 Indonesian National Social and Economic Survey (Susenas), this research reveals that financial inclusion decreases households' probability of absolute poverty. Furthermore, financial inclusion can compensate for a lack of assets, a limited number of non-agriculture occupational opportunities in rural areas, and low education levels of household heads. In addition, financial inclusion has the potential to reduce incentives for poor, low-skilled rural people to migrate to urban areas in search of non-agricultural employment opportunities. Policy recommendations based on the results found are twofold. First, for people who are vulnerable to poverty, financial inclusion should be enhanced, especially for poor women-headed farming households in rural areas. Second, for policy-makers concerned with urbanization of low-skilled poor migrants, enhancing financial inclusion in rural areas is needed to help reduce urbanization pressures.

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Threshold effects in the relationship between financial development and income inequality

Chakroun

2020

Int. J Fin Econ

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This paper investigates the existence of nonlinearities in the relationship between financial development and income inequality, using the instrumental variable threshold regression introduced by Caner and Hansen in2004. It is shown, on the basis of cross‐sectional data of 60 developed and developing countries, that there is a significant financial development threshold effect in the finance–inequality nexus. Particularly, our findings are consistent with the Greenwood and Jovanovic hypothesis of an inverted U‐shaped relationship between banking sector development and inequality. However, there is no evidence for an inverted U‐shaped relationship between stock market development and inequality. Besides, our estimates lead to inconclusive results regarding the impact of stock market development on income distribution in low‐ and lower‐middle‐income countries. Our results show that under the lower regime, the weight of the market is very light and its contribution to income distribution does not matter, whereas under the higher regime, market expansion leads to more inequity.

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Economic Growth, Financial Development, and Income Inequality

Cited by 77 publications

References 25 publications

Financial Development and Income Inequality in Emerging Markets: A New Approach

Financial Development and Income Inequality in Emerging Markets: A New Approach

Does financial inclusion alleviate household poverty? Empirical evidence from Indonesia

Threshold effects in the relationship between financial development and income inequality

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