Symmetric and asymmetric effects of financial deepening on income inequality in South Africa

Mduduzi Biyase and Carolyn Chisadza

Development Southern Africa, 2023, vol. 40, issue 5, 961-978

Abstract: The aim of this study is to examine the financial development-inequality nexus in South Africa from 1980 to 2017, specifically if financial deepening reduces income inequality. The initial results indicate a positive association between financial deepening and income inequality. On further exploration, we find evidence that the Greenwood and Jovanovich hypothesis holds for South Africa. We observe an inverted non-linear relationship between financial deepening and income inequality in the long-run. The results suggest that at early stages of financial development, income inequality increases, but gradually starts to decrease as the financial sector becomes more established in the long-run. The findings highlight the need for policymakers to focus on inclusive financial sector reforms in the early stages of financial development.

Date: 2023
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Working Paper: Symmetric and Asymmetric Effects of Financial Deepening on Income Inequality in South Africa (2022)
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DOI: 10.1080/0376835X.2022.2163226

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