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Financial Globalization and Inequality

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  • Kunieda, Takuma

Abstract

This paper investigates how financial globalization and financial development affect income inequality within a country. We demonstrate that when a country is financially closed to the world market, the Gini coefficient is monotonically decreasing with respect to the degree of financial development, whereas when a country becomes so small due to financial globalization that financial development in the country does not affect the world interest rate, the Gini coefficient is monotonically increasing with respect to the degree of financial development. A simple quantitative analysis for the Gini coefficients shows that income inequality in the United States is negatively affected by its financial development. In the United States, income inequality has widened since the late-1970s probably due to financial globalization and financial development.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11343.

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Date of creation: 25 Oct 2008
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Handle: RePEc:pra:mprapa:11343

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Keywords: Income inequality; Financial globalization; Financial development; Gini coefficient; Heterogeneous agents;

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