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Financial Development and Inequality: Brazil 1985-1994

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Author Info
Manoel Bittencourt (School of Economics, University of Cape Town / South Africa)

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Abstract

We examine the impact of financial development on earnings inequality in Brazil in the 1980s and first half of the 1990s. The evidence– based on panel-time series data and analysis–shows that financial development had a significant and robust effect in reducing inequality during the period. We suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by high rates of inflation. The main implication of the results is that a deeper and more active financial sector, alleviates the high inequality seen in Brazil without distorting economic efficiency.

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Publisher Info
Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 164.

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Length: 24 pages
Date of creation: 10 Oct 2007
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Handle: RePEc:got:iaidps:164

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Related research
Keywords: Financial development; inequality; Brazil;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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