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Finance and Inequality: The Case of India

  • James B. Ang


    (Department of Economics, Monash University, 900 Dandenong Road, Caulfield East, Vic 3145, Australia)

Although theory emphasizes the role of financial market frictions in explaining income inequality, there is little empirical research exploring how financial development and financial sector reforms influence the evolution of income inequality. This article examines how finance impacts income inequality in India using annual time series data for over half a century. The results indicate that while financial development helps reduce income inequality, financial liberalization seems to exacerbate it. The results are robust to the use of different measures for financial development and financial liberalization.

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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2010)
Issue (Month): 3 (January)
Pages: 738-761

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Handle: RePEc:sej:ancoec:v:76:3:y:2010:p:738-761
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