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Financial Market Integration and Income Inequality

Author

Listed:
  • Jae Wook Jung

    (Sogang University)

  • Kyunghun Kim

    (Hongik University)

Abstract

Over the past decades, financial markets have been integrated across countries while income inequality has increased in most countries. This paper studies the effect of financial market integration on income inequality and investigates whether this effect varies with the degree of financial market development. We find empirical evidence that financial market integration and financial market development interact to change income inequality. Specifically, the effect of financial market integration on income inequality is nonlinear, and the degree of financial market development plays an important role. Opening financial markets worsens income inequality in the countries holding the underdeveloped state of financial markets, however, the effect of capital account openness on income inequality is statistically insignificant in the countries with developed financial markets.

Suggested Citation

  • Jae Wook Jung & Kyunghun Kim, 2021. "Financial Market Integration and Income Inequality," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 25(2), pages 175-203.
    • Handle: RePEc:ris:eaerev:0395
    DOI: 10.11644/KIEP.EAER.2021.25.2.395
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    Cited by:

    1. Linsheng Chen & Jianli Bai & Shiwei Xu & Zhengrong Cheng & Jiahui Chen, 2024. "Financial Literacy, Fintech, and Risky Financial Investment in Urban Households—An Analysis Based on CHFS Data," Mathematics, MDPI, vol. 12(21), pages 1-17, October.
    2. Jorge Carrera & Gabriel Montes-Rojas & Mariquena Solla & Fernando Toledo, 2023. "Does Income Inequality Affect Capital Flows? Evidence from Emerging Markets and Developing Economies," Documentos de trabajo del Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET) 2023-86, Universidad de Buenos Aires, Facultad de Ciencias Económicas, Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET).
    3. Carrera Jorge & Montes-Rojas Gabriel & Panigo Demian & Toledo Fernando, 2024. "Income Inequality and External Wealth of Nations," Journal of Globalization and Development, De Gruyter, vol. 15(1), pages 47-62.

    More about this item

    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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