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Banking development, economic structure and income inequality

Author

Listed:
  • Alexandra D'Onofrio

    (ASSONIME)

  • Raoul Minetti

    (Michigan State University)

  • Pierluigi Murro

    (LUMSA University)

Abstract

Using rich data from the Italian local credit markets (provinces), this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link. Exploiting the Italian historical banking regulationtoin strument for the local presence of bank branches, we find that local banking development mitigates income inequality and poverty. However, the finance-inequality nexus manifests itself only in relatively advanced areas, suggesting important non-linearities. When we study the structural channels of influence, we obtain evidence that banking development can reduce inequality by affecting geographical mobility and urbanization, while it has modest effects through the development of material infrastructures and human capital.

Suggested Citation

  • Alexandra D'Onofrio & Raoul Minetti & Pierluigi Murro, 2016. "Banking development, economic structure and income inequality," CERBE Working Papers wpC08, CERBE Center for Relationship Banking and Economics.
    • Handle: RePEc:lsa:wpaper:wpc08
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jeremie Bertrand & Pierluigi Murro, 2018. "Is trade credit a substitute for relationship lending credit?," CERBE Working Papers wpC25, CERBE Center for Relationship Banking and Economics.
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    3. Raoul Minetti & Pierluigi Murro & Valentina Peruzzi, 2021. "Not All Banks Are Equal: Cooperative Banking And Income Inequality," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 420-440, January.
    4. Tuomas Malinen, 2016. "Does income inequality contribute to credit cycles?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 309-325, September.
    5. Murro, Pierluigi & Peruzzi, Valentina, 2019. "Family firms and access to credit. Is family ownership beneficial?," Journal of Banking & Finance, Elsevier, vol. 101(C), pages 173-187.
    6. Diana Barros & Aurora A. C. Teixeira, 2021. "Unlocking the black box: A comprehensive meta-analysis of the main determinants of within-region income inequality," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 55-93, February.
    7. Gislain Stéphane Gandjon Fankem & Marthe Dorelle Melingui, 2021. "Le développement financier affecte‐t‐il l'inégalité de revenus en Afrique subsaharienne?," African Development Review, African Development Bank, vol. 33(4), pages 620-633, December.

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    More about this item

    Keywords

    Income inequality; Financial development; Socio economic structure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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