Finance, income inequality and income redistribution

Adriaan Van Velthoven, Jakob de Haan and Jan-Egbert Sturm

Applied Economics Letters, 2019, vol. 26, issue 14, 1202-1209

Abstract: Using a panel fixed effects model for a large sample of countries covering 1975–2005, we test the hypothesis that income inequality caused by finance (financial development, financial liberalization and banking crises) is related to more income redistribution than inequality caused by other factors. Our results provide evidence in support of this hypothesis. We also find that the impact of inequality on redistribution is conditioned by ethno-linguistic fractionalization. Our findings are robust to the inclusion of several control variables suggested by previous studies.

Date: 2019
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DOI: 10.1080/13504851.2018.1542483

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