Equity market liberalization, credit constraints and income inequality

Puyang Sun (), Somnath Sen and Shujing Jin

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2013, vol. 7, No 2013-12, 28 pages

Abstract: This paper provides compelling evidence that equity market liberalization, as the most efficient way to smooth financial market frictions such as credit constraints, can alleviate persistent cross-dynastic income inequality by promoting increased human capital accumulation. The authors examine the effect of equity market liberalization on inequality by using data from 72 countries for 1980-2006. Their measured effect is robust to alternative measures of equity market liberalization. Finally, the authors show that foreign equity flows benefit initially less-active stock markets more than the active ones, providing evidence that foreign equity flows act as a substitute for domestic financial markets. This finding emphasizes the possibility of reducing inequality and poverty through equity market liberalization.

Keywords: income inequality; equity market liberalization; human capital; economic growth (search for similar items in EconPapers)
JEL-codes: F36 F41 G0 O11 O15 O16 (search for similar items in EconPapers)
Date: 2013
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http://dx.doi.org/10.5018/economics-ejournal.ja.2013-12
https://www.econstor.eu/bitstream/10419/71409/1/740146815.pdf (application/pdf)

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Working Paper: Equity market liberalization, credit constraints and income inequality (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201312

DOI: 10.5018/economics-ejournal.ja.2013-12

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