 The inequality-credit nexusRonald Fischer, Diego Huerta and Patricio Valenzuela Journal of International Money and Finance, 2019, vol. 91, issue C, 105-125 Abstract: This paper explores the inequality-credit nexus from both a theoretical and an empirical perspective. The paper develops an overlapping generation model in which the effect of income inequality on private credit depends on the countries’ per capita income and on the quality of laws protecting creditor rights. The model predicts that greater inequality leads to higher levels of private credit in countries with low per capita incomes and weak legal rights, while this effect is ambiguous or negative in economies with higher aggregate income and stronger credit protection. Using a panel dataset of 155 countries over the 1982–2015 period, the paper shows empirical evidence that is robust and consistent with the model’s predictions. The paper’s major finding suggests a credit channel through which inequality may affect economic outcomes. Keywords: Financial development; Inequality; Legal rights; Private credit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:91:y:2019:i:c:p:105-125 DOI: 10.1016/j.jimonfin.2018.11.004 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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