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Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL

muhammad Ismail Haffejee and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Income inequality in South Africa has been increasing from a Gini-coefficient height of 0.57 in 2000 to 0.65 in 2014. It is therefore important to investigate whether, in a developing economy, financial sector development reduces or worsens income inequality by mobilising and allocating savings into productive investments. For this purpose, South Africa, with arguably the second-largest economy in Africa, has been identified. The Non-linear Auto Regressive Distributed Lag (NARDL) technique advanced by Shin et. al. (2014) has been applied. This paper contributes to existing literature both in terms of being country-specific as well as demonstrating for the first time, to the best of our knowledge, that there is no long-run asymmetry between financial development and income inequality. Our conclusions support the pressing need for double-digit economic growth in South Africa together with moderate increase in government consumption expenditures.

Keywords: Financial development; Income Inequality; South Africa; NARDL (search for similar items in EconPapers)
JEL-codes: C22 C58 G23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets and nep-fdg
Date: 2018-06-12
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