Financial Globalization and Inequality

Takuma Kunieda

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates how financial globalization and financial development affect income inequality within a country. We demonstrate that when a country is financially closed to the world market, the Gini coefficient is monotonically decreasing with respect to the degree of financial development, whereas when a country becomes so small due to financial globalization that financial development in the country does not affect the world interest rate, the Gini coefficient is monotonically increasing with respect to the degree of financial development. A simple quantitative analysis for the Gini coefficients shows that income inequality in the United States is negatively affected by its financial development. In the United States, income inequality has widened since the late-1970s probably due to financial globalization and financial development.

Keywords: Income inequality; Financial globalization; Financial development; Gini coefficient; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E24 F43 O16 (search for similar items in EconPapers)
Date: 2008-10-25
New Economics Papers: this item is included in nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11343

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