Income Inequality and Financialization: Evidence for MENA Countries

Amira Hakim

International Journal of Economics & Business Administration (IJEBA), 2025, vol. XIII, issue 3, 3-23

Abstract: Purpose: Using country panel data, we analyze the impact of financialization through the interconnectedness between the financial system and the real sector on income inequality in MENA countries from 2000 to 2015. Design/methodology/approach: Focusing on the real sector we use Islamic finance indicator as a proxy for financialization, we find a positive link between income inequality and financialization. Findings: We demonstrate empirically that financialization can be used as tool to target policy over social economic problem such as income inequality. Our measure of financialization indicates that Islamic finance is a tool to reduce the inequality in the economy such as income inequality. Practical implications: Our results suggest that a rise in private debt, trade openness, and economic development contribute to the decrease of inequality, while foreign direct investment, the unemployment rate, the age dependency ratio, and the fixed investment are associated with an increase in inequality. Originality/value: The empirical results show that the impact of financialization in the long term is more important that in the Short term.

Keywords: Financialisation; Islamic finance; Income inequality; MENA countries. (search for similar items in EconPapers)
JEL-codes: D31 E44 G10 O16 O53 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ers:ijebaa:v:xiii:y:2025:i:3:p:3-23

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