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Finance, inequality and the poor

  • Thorsten Beck
  • Asli Demirgüç-Kunt
  • Ross Levine

Financial development disproportionately boosts incomes of the poorest quintile and reduces income inequality. About 40% of the long-run impact of financial development on the income growth of the poorest quintile is the result of reductions in income inequality, while 60% is due to the impact of financial development on aggregate economic growth. Furthermore, financial development is associated with a drop in the fraction of the population living on less than $ 1 a day, a result which holds when conditioning on average growth. These findings emphasize the importance of the financial system for the poor. Copyright Springer Science+Business Media, LLC 2007

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Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 12 (2007)
Issue (Month): 1 (March)
Pages: 27-49

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Handle: RePEc:kap:jecgro:v:12:y:2007:i:1:p:27-49
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