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Income inequality and banking crises: Testing the level hypothesis directly

Giorgio Bellettini (), Flavio Delbono (), Peter Karlström and Sergio Pastorello

Journal of Macroeconomics, 2019, vol. 62, issue C

Abstract: We perform an empirical analysis to investigate the relationship between income inequality and the occurrence of banking crises on a panel of 33 advanced countries in the period 1970–2011. Differently from other empirical studies, we focus on levels rather than growth rates of income inequality. We find a statistically significant and positive relationship between the value of the Gini index and the probability of banking crises. This result is confirmed when income distribution is summarized by the top 1% income share.

Keywords: Income inequality; Banking crises; Credit booms (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jmacro.2018.08.007

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Handle: RePEc:eee:jmacro:v:62:y:2019:i:c:s0164070417305682