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Financial Deepening, Property Rights and Poverty

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  • Yifei Huang
  • Raju Jan Singh

Abstract

Recent studies on the relationship between financial development and poverty have been inconclusive. Some claim that, by allowing more entrepreneurs to obtain financing, financial development improves the allocation of capital, which has a particularly large impact on the poor. Others argue that it is primarily the rich and politically connected who benefit from improvements in the financial system. This paper looks at a sample of 37 countries in sub-Saharan Africa from 1992 through 2006. Its results suggest that financial deepening could narrow income inequality and reduce poverty, and that stronger property rights reinforce these effects. Interest rate and lending liberalization alone could, however, be detrimental to the poor if not accompanied by institutional reforms, in particular stronger property rights and wider access to creditor information.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/196.

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Length: 31
Date of creation: 01 Aug 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/196

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Keywords: Income distribution; Access to capital markets; Household credit; Poverty reduction; property rights; dependent variable; gini coefficient; descriptive statistics; law; measure of poverty; distribution of income; persistent poverty; growth pro-poor; headcount poverty; increase income inequality; wealth distribution; gini index; reducing poverty; inequality will; per capita consumption; pro-poor;

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References

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  1. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  2. Beegle, Kathleen & Dehejia, Rajeev H & Gatti, Roberta, 2005. "Child Labour, Crop Shocks and Credit Constraints," CEPR Discussion Papers 4881, C.E.P.R. Discussion Papers.
  3. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  4. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  5. Thierry Tressel & Enrica Detragiache, 2008. "Do Financial Sector Reforms Lead to Financial Development? Evidence From a New Dataset," IMF Working Papers 08/265, International Monetary Fund.
  6. Sylviane GUILLAUMONT JEANNENEY & Kangni KPODAR, 2004. "Développement financier, instabilité financière et réduction de la pauvreté," Working Papers 200429, CERDI.
  7. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2005. "Financial Development, Financial Instability and Poverty," Economics Series Working Papers WPS/2005-09, University of Oxford, Department of Economics.
  8. Dhaneshwar Ghura & Kangni Kpodar & Raju Jan Singh, 2009. "Financial Deepening in the CFA Franc Zone:The Role of Institutions," IMF Working Papers 09/113, International Monetary Fund.
  9. Rajeev Dehejia & Roberta Gatti, 2002. "Child Labor: The Role of Income Variability and Access to Credit Across Countries," NBER Working Papers 9018, National Bureau of Economic Research, Inc.
  10. Georg R. G. Clarke & Lixin Colin Xu & Heng-fu Zou, 2006. "Finance and Income Inequality: What Do the Data Tell Us?," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 578-596, January.
  11. Poonam Gupta & Thierry Tressel & Enrica Detragiache, 2005. "Finance in Lower Income Countries," IMF Working Papers 05/167, International Monetary Fund.
  12. Pablo Druck & Alexander Plekhanov & Mario Dehesa, 2007. "Relative Price Stability, Creditor Rights, and Financial Deepening," IMF Working Papers 07/139, International Monetary Fund.
  13. E. Gelbard & Sérgio Pereira. Leite, 1999. "Measuring Financial Development in Sub-Saharan Africa," IMF Working Papers 99/105, International Monetary Fund.
  14. Calvin A. McDonald & Liliana Schumacher, 2007. "Financial Deepening in Sub-Saharan Africa," IMF Working Papers 07/203, International Monetary Fund.
  15. Sylviane Guillaumont Jeanneney & Kangni Kpodar, 2011. "Financial Development and Poverty Reduction: Can There be a Benefit without a Cost?," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 143-163.
  16. Raju Jan SINGH, 1997. "Banks, Growth And Geography," UNCTAD Discussion Papers 127, United Nations Conference on Trade and Development.
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Cited by:
  1. Le Goff, Maelan & Singh, Raju Jan, 2013. "Does trade reduce poverty ? a view from Africa," Policy Research Working Paper Series 6327, The World Bank.
  2. Kpodar, Kangni & Singh, Raju Jan, 2011. "Does financial structure matter for poverty ? evidence from developing countries," Policy Research Working Paper Series 5915, The World Bank.

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