Impact of Financialization and Financial Development on Inequality: Panel Cointegration Results Using OECD Data*

Hochul Shin () and Keun Lee ()
Additional contact information
Hochul Shin: Center for Distributive Justice Seoul National University Gwanak-ro 1, Gwanak-gu Seoul, Korea

Asian Economic Papers, 2019, vol. 18, issue 1, 69-90

Abstract: This study compares the long-run impact of financialization and financial development on inequality through the panel cointegration approach using OECD country data. Results show that financialization, especially high-dividend tendency in non-financial corporations, is one of the causes of rising inequality measured as the share of the top 10 percent richest. Other measures of financialization, such as the increasing size of the financial sector and financial globalization, are not robustly linked to inequality. In addition, the argument that financial development reduces inequality by relaxing the credit constraints of the poor is not supported, and no evidence shows that financial development aggravates inequality. Further, the impact of skills-biased technological change is not a robust variable in explaining inequality. A policy implication is that a simple focus on financial development is not enough to reduce inequality. Government policies are necessary, including differentiated taxation on dividends and reinvestments, which induce non-financial firms to focus on productive reinvestments from profits and discourage high dividends for shareholders.

Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/asep_a_00659 (application/pdf)
Access to PDF is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:asiaec:v:18:y:2019:i:1:p:69-90

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=1535-3516

Access Statistics for this article

Asian Economic Papers is currently edited by Wing Thye Woo, Sungbae An, Fukunari Kimura and Ming Lu

More articles in Asian Economic Papers from MIT Press
Bibliographic data for series maintained by The MIT Press ().