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Banking development, economic structure and income inequality

Alexandra D'Onofrio, Raoul Minetti and Pierluigi Murro ()

No wpC08, CERBE Working Papers from CERBE Center for Relationship Banking and Economics

Abstract: Using rich data from the Italian local credit markets (provinces), this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link. Exploiting the Italian historical banking regulationtoin strument for the local presence of bank branches, we find that local banking development mitigates income inequality and poverty. However, the finance-inequality nexus manifests itself only in relatively advanced areas, suggesting important non-linearities. When we study the structural channels of influence, we obtain evidence that banking development can reduce inequality by affecting geographical mobility and urbanization, while it has modest effects through the development of material infrastructures and human capital.

Keywords: Income inequality; Financial development; Socio economic structure (search for similar items in EconPapers)
JEL-codes: G21 G38 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cse, nep-eur and nep-ure
Date: 2016-07
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http://repec.lumsa.it/wp/wpC08.pdf (application/pdf)

Related works:
Working Paper: Local banking development and income distribution across Italian provinces (2013) Downloads
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