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Do financial reforms help stabilize inequality?

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  • Christopoulos, Dimitris
  • McAdam, Peter

Abstract

We explore the relationship between financial reforms and income inequality using a panel of 29 countries in 1975–2005. We extend panel unit root tests to allow for the presence of some financial-reform covariates and further suggest an associated but novel, semi-parametric approach. Results demonstrate that although both gross and net Gini indices follow a unit root process, this picture can change when financial reform indices are accounted for. In particular, while gross Gini coefficients are generally not stabilized by financial reforms, net measures are (more likely to be). Thus financial reforms enacted in the presence of a strong safety net would seem preferable.

Suggested Citation

  • Christopoulos, Dimitris & McAdam, Peter, 2017. "Do financial reforms help stabilize inequality?," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 45-61.
  • Handle: RePEc:eee:jimfin:v:70:y:2017:i:c:p:45-61
    DOI: 10.1016/j.jimonfin.2016.05.003
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    1. repec:eee:poleco:v:50:y:2017:i:c:p:171-195 is not listed on IDEAS
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:1030-1039 is not listed on IDEAS
    3. de Haan, Jakob & Sturm, Jan-Egbert, 2017. "Finance and income inequality: A review and new evidence," European Journal of Political Economy, Elsevier, vol. 50(C), pages 171-195.
    4. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "New Zealand inequality and the struggle between capital and labour," Working Paper Series 4156, Victoria University of Wellington, School of Economics and Finance.
    5. Sturm, Jan-Egbert & De Haan, Jakob, 2016. "Finance and income inequality revisited," Annual Conference 2016 (Augsburg): Demographic Change 145660, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Inequality; Gini coefficient; Financial reform; Unit root; Panel; Fractional integration;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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