Does more finance mean more inequality in times of crisis ?

Clément Mathonnat () and Benjamin Williams ()
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Clément Mathonnat: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Benjamin Williams: UCA - Université Clermont Auvergne

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Abstract: Many recent empirical studies show that both banking crises and financial development (FD) play an important role in understanding the dynamics of income inequality (IncI) over the last decades. However, so far no study has investigated the role of FD in the amplification of IncI following banking crises. This paper seeks to address this issue based on a sample of 69 banking crises in 54 countries over the 1977-2013 period. Our analysis suggests that FD is associated with a significant increase in IncI in the aftermath of banking crises. This result is robust to a broad range of alternative specifications and is unaffected by various potential sources of endogeneity. We also show that the relationship between FD and the redistributive consequences of banking crises is not subject to a threshold effect and is stronger for developing countries.

Keywords: Financial development; Banking crises; Income inequality (search for similar items in EconPapers)
Date: 2020-12
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03165343v1
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Published in Economic Systems, 2020, 44 (4), pp.100818. ⟨10.1016/j.ecosys.2020.100818⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03165343

DOI: 10.1016/j.ecosys.2020.100818

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