Financial Development and Income Inequality in Emerging Markets: A New Approach

Thang Cong Nguyen, Tan Ngoc Vu, Duc Hong Vo and Dao Thi-Thieu Ha
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Thang Cong Nguyen: Business and Economics Research Group, Ho Chi Minh City Open University, Ho Chi Minh City 70000, Vietnam
Tan Ngoc Vu: Business and Economics Research Group, Ho Chi Minh City Open University, Ho Chi Minh City 70000, Vietnam
Duc Hong Vo: Business and Economics Research Group, Ho Chi Minh City Open University, Ho Chi Minh City 70000, Vietnam
Dao Thi-Thieu Ha: International Economics Faculty, Banking University Ho Chi Minh City, Ho Chi Minh City 70000, Vietnam

JRFM, 2019, vol. 12, issue 4, 1-14

Abstract: Financial development has been considered an efficient and effective mechanism for the sustainable economic growth and development of emerging markets in past decades. However, various concerns have emerged in relation to the influences of financial sector development on income inequality. It is the claim of this paper that findings from the current literature are incomplete. This is because various proxies have been utilized inconsistently for both financial development and income inequality in previous empirical studies. This study extends the current literature on this important finance–inequality nexus by examining a sample of 21 emerging countries for the period of 1961–2017. Various estimation techniques were employed with the aim of ensuring robust findings. Findings from this paper confirm the existence of an inverted U-curve relationship between financial development and income inequality, implying that income inequality may rise at the early stage of financial development and fall after a certain level is achieved. Policy implications have emerged from the findings of this study.

Keywords: financial development; income inequality; FMOLS; DOLS; emerging markets (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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