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The effects of financial development on income inequality and poverty

Vivien Kappel

No 25, Proceedings of the German Development Economics Conference, Hannover 2010 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: This paper examines the effects of financial development on income inequality and poverty. The results of both cross-country and panel data regressions suggest that inequality and poverty are reduced not only through enhanced loan markets, but also through more developed stock markets. We show that ethnic diversity and the distribution of land are significant and robust determinants of both income inequality and poverty. Finally, we find evidence that government spending leads to a reduction in income inequality in high income countries. In low income countries, however, we find no significant effect.

Keywords: Financial development; inequality; poverty (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2010
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