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Economic literacy, inequality, and financial development

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  • Lo Prete, Anna

Abstract

Empirical studies of the link between finance and inequality document that across countries financial development is associated with lower and decreasing income inequality. This article uses an indicator of economic literacy as a proxy for the ability to reap the benefits of financial investment opportunities, and documents that such specific competences matter for the relationship between changes in inequality and financial development. As financial markets become more sophisticated, the ability to take advantage of new investment opportunities may help reduce inequality, and the empirical association between financial development and lower income inequality indeed appears to be driven by economic literacy.

Suggested Citation

  • Lo Prete, Anna, 2013. "Economic literacy, inequality, and financial development," Economics Letters, Elsevier, vol. 118(1), pages 74-76.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:74-76
    DOI: 10.1016/j.econlet.2012.09.029
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    References listed on IDEAS

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    1. Georg R. G. Clarke & Lixin Colin Xu & Heng-fu Zou, 2006. "Finance and Income Inequality: What Do the Data Tell Us?," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 578-596, January.
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    4. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
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    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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