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Financial structure and income inequality

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  • Gambacorta, Leonardo
  • Brei, Michael
  • ,

Abstract

This paper empirically investigates the link between financial structure and income inequality. Using data for a panel of 97 economies over the period 1989-2012, we find that the relationship is not monotonic. Up to a point, more finance reduces income inequality. Beyond that point, inequality rises if finance is expanded via market-based financing, while it does not when finance grows via bank lending. These findings concur with a well-established literature indicating that deeper financial systems help reduce poverty and inequality in developing countries, but also with recent evidence of rising inequality in various financially advanced economies.

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  • Gambacorta, Leonardo & Brei, Michael & ,, 2018. "Financial structure and income inequality," CEPR Discussion Papers 13330, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13330
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    More about this item

    Keywords

    Inequality; Finance; Banks; Financial markets;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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