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The Effects of Financial Development on Income Inequality and Poverty

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    Abstract

    This paper examines the effects of financial development on income inequality and poverty. The results of both cross-country and panel data regressions suggest that inequality and poverty are reduced not only through enhanced loan markets, but also through more developed stock markets. We show that ethnic diversity and the distribution of land are significant and robust determinants of both income inequality and poverty. Finally, we find evidence that government spending leads to a reduction in income inequality in high income countries. In low income countries, however, we find no significant effect.

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    File URL: http://www.cer.ethz.ch/research/WP-10-127.pdf
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    Bibliographic Info

    Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 10/127.

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    Length: 40 pages
    Date of creation: Mar 2010
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    Handle: RePEc:eth:wpswif:10-127

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    Keywords: Financial development; inequality; poverty;

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    Cited by:
    1. Shahbaz, Muhammad & Islam, Faridul, 2011. "Financial development and income inequality in Pakistan: An application of ARDL approach," MPRA Paper 28222, University Library of Munich, Germany.

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