Financial Development and Poverty Reduction: Can There be a Benefit without a Cost?

Sylviane Guillaumont Jeanneney and Kangni Kpodar
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Sylviane Guillaumont Jeanneney: CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique
Kangni Kpodar: IMF - IMF - IMF

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Abstract: This article investigates how financial development helps to reduce poverty directly through distributional effect, beyond its indirect effect through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities (through the McKinnon ‘conduit effect') but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is particularly detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.

Keywords: cerdi (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (112)

Published in The Journal of Development Studies, 2011, 47 (1), pp.143-163

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00554229

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