Long-Run Effects of Financial Development and Economic Growth on Poverty and Income Inequality in Latin America

Jhon Mario Panzza Jimenez Jhon Mario Panzza Jimenez and Leonardo Bornacki de Mattos

Revista Brasileira de Economia - RBE, 2026, vol. 80, issue 1

Abstract: We use a panel cointegration approach to assess the long-term effects of financial development and economic growth on poverty and income inequality in Latin America. Financial development is measured by three indicators and a comprehensive index derived from principal component analysis. The sample is divided into high, upper-middle, and lower-middle-income groups based on World Bank criteria. The findings show that, in the long run, economic growth and financial development follow an inverted U-shaped relationship with poverty and inequality, initially worsening them but eventually reducing them beyond a certain threshold. Middle-income countries experience the strongest impacts.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:80:y:2026:i:1:a:93256

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