Inequality and credit growth in Russian regions

Makram El-Shagi, Jarko Fidrmuc and Steven Yamarik

Economic Modelling, 2020, vol. 91, issue C, 550-558

Abstract: We test the Rajan hypothesis using data for Russian regions from 2000 (after the ruble crisis) to 2012 (before the introduction of international sanctions). The Rajan hypothesis predicts that rising income inequality leads politicians to expand credit for the poor, which in turn, fuels a consumer credit boom. Russia provides a unique research opportunity becaise it is a post-communist transition country with 75 diverse regions. We find that a rise in income inequality is positively correlated with personal loan growth in Russia. We also find a statistically weaker, albeit economically larger, relationship between economic inequality and corporate credit. Taken together, our results provide support for the Rajan hypothesis in a country with extreme regional differences and a long history of populist policies.

Keywords: Income inequality; Bank loans; Rajan hypothesis; Russia (search for similar items in EconPapers)
JEL-codes: E51 G01 R11 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Inequality and credit growth in Russian regions (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:91:y:2020:i:c:p:550-558

DOI: 10.1016/j.econmod.2019.11.003

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