 Threshold effects in the relationship between financial development and income inequalityMohamed Chakroun International Journal of Finance & Economics, 2020, vol. 25, issue 3, 365-387 Abstract: This paper investigates the existence of nonlinearities in the relationship between financial development and income inequality, using the instrumental variable threshold regression introduced by Caner and Hansen in2004. It is shown, on the basis of cross‐sectional data of 60 developed and developing countries, that there is a significant financial development threshold effect in the finance–inequality nexus. Particularly, our findings are consistent with the Greenwood and Jovanovic hypothesis of an inverted U‐shaped relationship between banking sector development and inequality. However, there is no evidence for an inverted U‐shaped relationship between stock market development and inequality. Besides, our estimates lead to inconclusive results regarding the impact of stock market development on income distribution in low‐ and lower‐middle‐income countries. Our results show that under the lower regime, the weight of the market is very light and its contribution to income distribution does not matter, whereas under the higher regime, market expansion leads to more inequity. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:25:y:2020:i:3:p:365-387 Ordering information: This journal article can be ordered from Access Statistics for this article International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.