The long-run relationship between finance and income inequality: Evidence from panel data

John Thornton and Caterina Di Tommaso

Finance Research Letters, 2020, vol. 32, issue C

Abstract: We use heterogeneous panel cointegration techniques to examine the long-run effect of financial development on income inequality in a panel of 119 countries from 1980 to 2015. We include real GDP per capita in the cointegration relation and explicitly deal with cross-sectional dependence in the data that arises due to unobserved common factors. On average, financial development reduces income inequality in the long-run, with the result robust to different measures of finance and across country income groups.

Keywords: Income inequality; Financial development; Heterogeneous panel cointegration (search for similar items in EconPapers)
JEL-codes: D31 D63 F02 O15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:32:y:2020:i:c:s1544612319301576

DOI: 10.1016/j.frl.2019.04.036

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