Finance, Inequality, and Poverty: Cross-Country Evidence

Thorsten Beck (), Asli Demirguc-Kunt and Ross Levine ()

No 10979, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While substantial research finds that financial development boosts overall economic growth, we study whether financial development disproportionately raises the incomes of the poor and alleviates poverty. Using a broad cross-country sample, we distinguish among competing theoretical predictions about the impact of financial development on changes in income distribution and poverty alleviation. We find that financial development reduces income inequality by disproportionately boosting the incomes of the poor. Countries with better-developed financial intermediaries experience faster declines in measures of both poverty and income inequality. These results are robust to controlling for other country characteristics and potential reverse causality.

JEL-codes: O11 O16 G00 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-mfd
Date: 2004-12
Note: CF
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Working Paper: Finance, inequality, and poverty: cross-country evidence (2004)
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