Does the impact of financial liberalization on income inequality depend on financial development? Some new evidence

Jakob de Haan, Regina Pleninger and Jan-Egbert Sturm

Applied Economics Letters, 2018, vol. 25, issue 5, 313-316

Abstract: Instead of empirically finding that higher levels of financial development reduce the positive impact of financial liberalization on inequality, as others do, we come up with the opposite result: financial development strengthens the inequality-raising impact of financial liberalization. We suggest that by, e.g., allowing financial liberalization to lead to more volatility and uncertainty, the model of Bumann and Lensink (2016 “Capital Account Liberalization and Income Inequality.“ Journal of International Money and Finance 61: 143–162.) can be extended as such that also an amplifying instead of reducing effect of financial depth on the impact of financial liberalization on income inequality can be theoretically justified.

Date: 2018
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DOI: 10.1080/13504851.2017.1319554

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