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Financial Development and Inequality: Brazil 1985-99

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Author Info
Meyer Bittencourt, Manoel F. Meyer

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Abstract

We examine the impact that financial development had on earnings inequality in Brazil in the 1980?s and 90?s. The empirical evidence, based on panel time series and time series data, shows that more broad access to financial and credit markets had a significant and robust effect in reducing inequality during the period investigated. We suggest that this is not only because the poor can invest the acquired credit in all sorts of productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by extreme inflation rates. The main implication of the results is that a seemingly non-distortionary policy, such as more credit aimed at the poor, alleviates the high inequality present in Brazil and consequently improves welfare without distorting economic efficiency.

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Publisher Info
Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Berlin 2006 with number 5.

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Date of creation: 2006
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Handle: RePEc:zbw:gdec06:4728

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Related research
Keywords: Financial development and markets; credit; inequality and welfare; inflation;

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

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This page was last updated on 2009-11-22.

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