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How do financial reforms affect inequality through financial sector competition? Evidence from Africa

  • Simplice A Asongu

    ()

    (African Governance and Development Institute)

In the first empirical study on how financial reforms have been instrumental in mitigating inequality through financial sector competition, we contribute at the same time to the macroeconomic literature on measuring financial development and respond to the growing field of economic development by means of informal sector promotion. Hitherto, unexplored financial sector concepts of formalization, semi-formalization and informalization are introduced. Four main findings are established: (1) while formal financial development decreases inequality, financial sector formalization increases it; (2) whereas semi-formal financial development increases inequality, the effect of financial semi-formalization is unclear; (3) both informal financial development and financial informalization have an income equalizing effect and; (4) non-formal financial development is pro-poor. Policy implications are discussed.

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File URL: http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I1-P39.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 33 (2013)
Issue (Month): 1 ()
Pages: 401-414

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Handle: RePEc:ebl:ecbull:eb-13-00001
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  1. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  3. Simplice A., Asongu, 2011. "Investment and inequality in Africa: which financial channels are good for the poor?," MPRA Paper 34990, University Library of Munich, Germany.
  4. Asongu Simplice, 2012. "Financial sector competition and knowledge economy: evidence from SSA and MENA countries," Working Papers 12/021, African Governance and Development Institute..
  5. Asongu Simplice, 2012. "How has Mobile Banking Stimulated Financial Development in Africa?," Working Papers 12/027, African Governance and Development Institute..
  6. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
  7. Magnus Saxegaard, 2006. "Excess Liquidity and the Effectiveness of Monetary Policy; Evidence From Sub-Saharan Africa," IMF Working Papers 06/115, International Monetary Fund.
  8. Asongu Simplice, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Working Papers 12/026, African Governance and Development Institute..
  9. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
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