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Do financial reforms help stabilize inequality?

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  • Christopoulos, Dimitris
  • McAdam, Peter

Abstract

We explore the relationship between financial reforms and income inequality using a panel of 29 countries in 1975–2005. We extend panel unit root tests to allow for the presence of some financial-reform covariates and further suggest an associated but novel, semi-parametric approach. Results demonstrate that although both gross and net Gini indices follow a unit root process, this picture can change when financial reform indices are accounted for. In particular, while gross Gini coefficients are generally not stabilized by financial reforms, net measures are (more likely to be). Thus financial reforms enacted in the presence of a strong safety net would seem preferable.

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  • Christopoulos, Dimitris & McAdam, Peter, 2017. "Do financial reforms help stabilize inequality?," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 45-61.
    • Handle: RePEc:eee:jimfin:v:70:y:2017:i:c:p:45-61
    DOI: 10.1016/j.jimonfin.2016.05.003
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    3. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "New Zealand inequality and the struggle between capital and labour," Working Paper Series 4156, Victoria University of Wellington, School of Economics and Finance.
    4. Raju, Arun & Roy, Partho S, 2019. "Renewable Natural Gas Research Center Project," Institute of Transportation Studies, Working Paper Series qt0055g3kb, Institute of Transportation Studies, UC Davis.
    5. de Haan, Jakob & Sturm, Jan-Egbert, 2017. "Finance and income inequality: A review and new evidence," European Journal of Political Economy, Elsevier, vol. 50(C), pages 171-195.
    6. Yongfen Shi & Sudeshna Paul & Sudharshan Reddy Paramati, 2022. "The impact of financial deepening on income inequality: Empirical evidence from Australia," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3564-3579, July.
    7. Sturm, Jan-Egbert & De Haan, Jakob, 2016. "Finance and income inequality revisited," VfS Annual Conference 2016 (Augsburg): Demographic Change 145660, Verein für Socialpolitik / German Economic Association.
    8. Fischer, Ronald & Huerta, Diego & Valenzuela, Patricio, 2019. "The inequality-credit nexus," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 105-125.
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    11. Jelson Serafim, 2021. "Financial deepening, Stock market, Inequality and Poverty: Some African Evidence," Working Papers REM 2021/0177, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
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    More about this item

    Keywords

    Inequality; Gini coefficient; Financial reform; Unit root; Panel; Fractional integration;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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