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Nonlinearity in the financial development–income inequality nexus

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  • Kim, Dong-Hyeon
  • Lin, Shu-Chin

Abstract

The majority of theoretical studies on the relationship between income inequality and financial development argue that financial deepening might be a feasible instrument for improving income distribution. This paper finds that the prediction crucially depends on the stages of financial development that the country is undergoing. The benefits of financial depth only occur if the country has reached a threshold level of financial development. Below this critical value, financial development counteracts income inequality. Our policy implication is that a minimum level of financial development is a necessary precondition for achieving reduction in income inequality through financial development.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 39 (2011)
Issue (Month): 3 (September)
Pages: 310-325

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Handle: RePEc:eee:jcecon:v:39:y:2011:i:3:p:310-325

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Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Financial development Income inequality Instrumental variables Threshold regressions;

References

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Cited by:
  1. Muhammad, Shahbaz & Tiwari, Aviral & Reza, Sherafatian-Jahromi, 2012. "Financial Development and Income Inequality: Is there any Financial Kuznets curve in Iran?," MPRA Paper 40899, University Library of Munich, Germany, revised 26 Aug 2012.

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