Equity market liberalization, credit constraints and income inequality

Puyang Sun (), Somnath Sen and Shujing Jin

No 2012-22, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper provides compelling evidence that equity market liberalization, the most efficient way to smooth financial market frictions such as credit constraints, can alleviate persistent cross-dynastic income inequality through increasing the accumulation of human capital. We examine the impact of equity market liberalization on inequality by using the data of 72 countries during 1980-2006. The effect is robust to alternative measurements of equity market liberalization. Furthermore, equity market liberalization is associated with the different effects of credit constraints on the persistence of cross-dynastic income inequality. Finally, it is proved that foreign equity flows benefit the initially less active stock markets more than the active ones, which is important evidence that foreign equity flows act as a substitute for the domestic financial market. This finding emphasizes the importance of equity market liberalization for the poor, which helps to reduce inequality.

Keywords: Income inequality; equity market liberalization; human capital; economic growth (search for similar items in EconPapers)
JEL-codes: F36 F41 G0 O11 O15 O16 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.economics-ejournal.org/economics/discussionpapers/2012-22
https://www.econstor.eu/bitstream/10419/57771/1/715114786.pdf (application/pdf)

Related works:
Journal Article: Equity market liberalization, credit constraints and income inequality (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201222

Access Statistics for this paper

More papers in Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().