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Financial structure and income inequality

Michael Brei, Giovanni Ferri and Leonardo Gambacorta ()

No 756, BIS Working Papers from Bank for International Settlements

Abstract: This paper empirically investigates the link between financial structure and income inequality. Using data for a panel of 97 economies over the period 1989-2012, we find that the relationship is not monotonic. Up to a point, more finance reduces income inequality. Beyond that point, inequality rises if finance is expanded via market-based financing, while it does not when finance grows via bank lending. These findings concur with a well-established literature indicating that deeper financial systems help reduce poverty and inequality in developing countries, but also with recent evidence of rising inequality in various financially advanced economies.

Keywords: inequality; finance; banks; financial markets (search for similar items in EconPapers)
JEL-codes: G10 G21 O15 D63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-fdg
Date: 2018-11
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