Financialization and income inequality: An empirical analysis

Kang-Kook Lee and Md Abu Bakkar Siddique

Japanese Economy, 2021, vol. 47, issue 2-3, 121-145

Abstract: This study investigates the effect of financialization and financial rent on income inequality across countries, including advanced and emerging markets and developing countries, in the 1998–2017 period. Employing a new measurement and dynamic panel estimation, we find that financialization measured by financial rent increases income inequality. We also find that the more monopolized banking sector is associated with higher income inequality. It suggests that market concentration in the banking sector creates ample opportunities for banks to generate excess profit and income, which leads to higher top income concentration and overall inequality. Commonly used variables for financialization such as bank income, the stock trading value, stock market capitalization, and the banking sector asset compared to the economy are also harmful to inequality.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:mes:jpneco:v:47:y:2021:i:2-3:p:121-145

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DOI: 10.1080/2329194X.2021.1945465

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