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Financial Development and Inequality: Brazil 1985-1994

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  • Manoel Bittencourt

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, via a process of financial adaptation, against recurrent poor macroeconomic performance, which is exemplified in Brazil 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 the need for distortionary taxation.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 86.

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Date of creation: 2008
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Handle: RePEc:rza:wpaper:86

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Keywords: Financial development; inequality; Brazil;

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Citations

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Cited by:
  1. Manoel Bittencourt, 2013. "Economic Growth and Inequality: Evidence from the Young Democracies of South America," Working Papers 201301, University of Pretoria, Department of Economics.
  2. Manoel Bittencourt, 2010. "Financial Development and Economic Growth in Latin America: Is Schumpeter Right?," Working Papers 191, Economic Research Southern Africa.
  3. Muhammad, Shahbaz & Tiwari, Aviral & Reza, Sherafatian-Jahromi, 2012. "Financial Development and Income Inequality: Is there any Financial Kuznets curve in Iran?," MPRA Paper 40899, University Library of Munich, Germany, revised 26 Aug 2012.
  4. Manoel Bittencourt, 2010. "Financial Development and Economic Growth in Latin America: Schumpeter is Right!," Working Papers 201014, University of Pretoria, Department of Economics.
  5. Hamori, Shigeyuki & Hashiguchi, Yoshihiro, 2012. "The effect of financial deepening on inequality: Some international evidence," Journal of Asian Economics, Elsevier, Elsevier, vol. 23(4), pages 353-359.

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