Financial Development and Income Inequality: A Panel Data Approach

Sebastian Jauch () and Sebastian Watzka

No 3687, CESifo Working Paper Series from CESifo

Abstract: We analyze the link between financial development and income inequality for a broad unbalanced dataset of up to 138 developed and developing countries over the years 1960 to 2008. Using credit-to-GDP as a measure of financial development, our results reject theoretical models predicting a negative impact of financial development on income inequality measured by the Gini coefficient. Controlling for country fixed effects and GDP per capita, we find that financial development has a positive effect on income inequality. These results are robust to different measures of financial development, econometric specifications, and control variables.

Keywords: financial development; income inequality; global; panel analysis (search for similar items in EconPapers)
JEL-codes: O15 O16 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3687

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