IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Nonlinear dynamics of the finance-inequality nexus in developing countries

  • Hui-Boon Tan

    ()

  • Siong-Hook Law

This study examines the dynamics of the finance-inequality nexus in 35 developing countries during the past two decades, using two data sets of income inequality: the University of Texas Inequality Project (UTIP) and the Standardized World Income Inequality Database (SWIID). The empirical results of this study, based on the dynamic panel models, provide new evidence that highlights the nonlinear U-shaped relationship between financial deepening and income distribution. It implies the narrowing of the income-inequality gap at the early stage of financial development of the countries. This improvement, however, will only be sustainable dynamically below a certain threshold level. Further deepening above that level will lead to a reverse effect, which deteriorates income inequality. This reflects the inefficiency of financial markets in improving economic inequality when the threshold level is overshot. Copyright Springer Science+Business Media, LLC. 2012

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1007/s10888-011-9174-3
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal The Journal of Economic Inequality.

Volume (Year): 10 (2012)
Issue (Month): 4 (December)
Pages: 551-563

as
in new window

Handle: RePEc:kap:jecinq:v:10:y:2012:i:4:p:551-563
Contact details of provider: Web page: http://springerlink.metapress.com/link.asp?id=111137

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Beck, Thorsten & Levine, Ross, 2004. "Stock markets, banks, and growth: Panel evidence," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 423-442, March.
  2. Paul Wachtel, 2003. "How much do we really know about growth and finance?," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 33-47.
  3. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
  4. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  5. Jalilian, Hossein & Kirkpatrick, Colin, 2002. "Financial Development and Poverty Reduction in Developing Countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 97-108, April.
  6. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
  7. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  8. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  9. Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999. "Finance and the sources of growth," Policy Research Working Paper Series 2057, The World Bank.
  10. 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.
  11. Ross Levine, 2003. "More on finance and growth: more finance, more growth?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 31-46.
  12. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  13. Panicos Demetriades & Svetlana Andrianova, . "Finance and Growth: What We Know and What We Need To Know," Discussion Papers in Economics 03/15, Department of Economics, University of Leicester.
  14. Raghuram G. Rajan & Luigi Zingales, 2001. "Financial Systems, Industrial Structure, and Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 467-482.
  15. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:jecinq:v:10:y:2012:i:4:p:551-563. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)

or (Christopher F. Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.