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How do financial reforms affect inequality through financial sector competition? Evidence from Africa

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  • Simplice A Asongu

    ()
    (African Governance and Development Institute)

Abstract

In the first empirical study on how financial reforms have been instrumental in mitigating inequality through financial sector competition, we contribute at the same time to the macroeconomic literature on measuring financial development and respond to the growing field of economic development by means of informal sector promotion. Hitherto, unexplored financial sector concepts of formalization, semi-formalization and informalization are introduced. Four main findings are established: (1) while formal financial development decreases inequality, financial sector formalization increases it; (2) whereas semi-formal financial development increases inequality, the effect of financial semi-formalization is unclear; (3) both informal financial development and financial informalization have an income equalizing effect and; (4) non-formal financial development is pro-poor. Policy implications are discussed.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 1 ()
Pages: 401-414

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Handle: RePEc:ebl:ecbull:eb-13-00001

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Keywords: Financial Development; Shadow Economy; Poverty; Inequality; Africa;

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References

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  1. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  2. Simplice A. Asongu, 2013. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Journal of African Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 14(1), pages 7-18, April.
  3. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
  4. Asongu Simplice, 2012. "Financial sector competition and knowledge economy: evidence from SSA and MENA countries," Working Papers 12/021, African Governance and Development Institute..
  5. Simplice A. Asongu, 2013. "Investment And Inequality In Africa: Which Financial Channels Are Good For The Poor?," The African Finance Journal, Africagrowth Institute, Africagrowth Institute, vol. 15(2), pages 43-65.
  6. Magnus Saxegaard, 2006. "Excess Liquidity and the Effectiveness of Monetary Policy," IMF Working Papers 06/115, International Monetary Fund.
  7. Simplice A, Asongu, 2012. "How has mobile banking stimulated financial development in Africa?," MPRA Paper 38576, University Library of Munich, Germany.
  8. Hisako KAI & Shigeyuki HAMORI, 2009. "Globalization, Financial Depth, and Inequality in Sub-Saharan Africa," Discussion Papers 0912, Graduate School of Economics, Kobe University.
  9. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2007. "Finance, inequality and the poor," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125426, Tilburg University.
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Cited by:
  1. Asongu Simplice, 2014. "On the substitution of institutions and finance in investment," Working Papers 14/005, African Governance and Development Institute..
  2. Asongu Simplice, 2013. "New financial development indicators: with a critical contribution to inequality empirics," Working Papers 13/036, African Governance and Development Institute..
  3. Simplice A. Asongu & Gilbert A.A. Aminkeng, 2013. "The economic consequences of China--Africa relations: debunking myths in the debate," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(4), pages 261-277, November.
  4. Asongu Simplice, 2013. "The impact of mobile phone penetration on African inequality," Working Papers 13/021, African Governance and Development Institute..
  5. Asongu, Simplice A, 2014. "Knowledge Economy and Financial Sector Competition in African Countries," MPRA Paper 57385, University Library of Munich, Germany.
  6. Asongu, Simplice A, 2013. "Finance and growth: New evidence from Meta-analysis," MPRA Paper 52210, University Library of Munich, Germany.
  7. Asongu, Simplice, 2014. "Fresh Patterns of Liberalization, Bank Return and Return Uncertainty in Africa," MPRA Paper 56813, University Library of Munich, Germany.
  8. Asongu Simplice, 2013. "Finance and growth: Schumpeter might be wrong in our era. New evidence from Meta-analysis," Working Papers 13/009, African Governance and Development Institute..
  9. Asongu Simplice, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," Working Papers 13/031, African Governance and Development Institute..
  10. Asongu, Simplice, 2013. "Mobile banking and mobile phone penetration: which is more pro-poor in Africa?," MPRA Paper 56800, University Library of Munich, Germany.

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