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How do banking crises impact on income inequality?


  • Luca Agnello
  • Ricardo M. Sousa


We show that banking crises have an important effect on income distribution: inequality increases before banking crisis episodes and sharply declines afterwards. We also find that, while a large government size does not per se seem to reduce inequality, a rise in financial depth (i.e. better access to credit provided by the banking sector) contributes to a more equal distribution of income.

Suggested Citation

  • Luca Agnello & Ricardo M. Sousa, 2012. "How do banking crises impact on income inequality?," Applied Economics Letters, Taylor & Francis Journals, vol. 19(15), pages 1425-1429, October.
  • Handle: RePEc:taf:apeclt:v:19:y:2012:i:15:p:1425-1429 DOI: 10.1080/13504851.2011.631885

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    References listed on IDEAS

    1. Jong-eun Lee, 2010. "Inequality in the globalizing Asia," Applied Economics, Taylor & Francis Journals, vol. 42(23), pages 2975-2984.
    2. Lane Kenworthy & Jonas Pontusson, 2005. "Rising Inequality and the Politics of Redistribution in Affluent Countries," LIS Working papers 400, LIS Cross-National Data Center in Luxembourg.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
    4. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," American Economic Review, American Economic Association, vol. 105(3), pages 1217-1245, March.
    5. Fitoussi Jean Paul & Saraceno Francesco, 2010. "Europe: How Deep Is a Crisis? Policy Responses and Structural Factors Behind Diverging Performances," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-19, January.
    6. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242.
    7. Changkyu Choi, 2006. "Does foreign direct investment affect domestic income inequality?," Applied Economics Letters, Taylor & Francis Journals, vol. 13(12), pages 811-814.
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    Cited by:

    1. Castro, Vítor, 2013. "Macroeconomic determinants of the credit risk in the banking system: The case of the GIPSI," Economic Modelling, Elsevier, vol. 31(C), pages 672-683.
    2. Gonzalo Paz Pardo & José Manuel Sánchez Santos, 2014. "Household Debt and Consumption Inequality: The Spanish Case," Economies, MDPI, Open Access Journal, vol. 2(3), pages 1-24, July.
    3. Andersson, Fredrik NG, 2016. "A Blessing in Disguise? Banking Crises and Institutional Change," World Development, Elsevier, vol. 83(C), pages 135-147.
    4. Agnello, Luca & Mallick, Sushanta K. & Sousa, Ricardo M., 2012. "Financial reforms and income inequality," Economics Letters, Elsevier, vol. 116(3), pages 583-587.
    5. Jorge Calero & Álvaro Choi, 2015. "The distribution of skills among the European adult population and unemployment: a comparative approach," Working Papers 2015/35, Institut d'Economia de Barcelona (IEB).
    6. Castroa, Vitor & Kubota, Megumi, 2013. "Duration dependence and change-points in the likelihood of credit booms ending," Policy Research Working Paper Series 6475, The World Bank.
    7. Luca Agnello & Ricardo M. Sousa, 2011. "Fiscal Consolidation and Income Inequality," NIPE Working Papers 34/2011, NIPE - Universidade do Minho.
    8. Davide Furceri & Prakash Loungani, 2015. "Capital Account Liberalization and Inequality," IMF Working Papers 15/243, International Monetary Fund.
    9. Jakob de Haan & Jan-Egbert Sturm, 2016. "Finance and income inequality: A review and new evidence," KOF Working papers 16-410, KOF Swiss Economic Institute, ETH Zurich.
    10. Chaibi, Hasna & Ftiti, Zied, 2015. "Credit risk determinants: Evidence from a cross-country study," Research in International Business and Finance, Elsevier, vol. 33(C), pages 1-16.
    11. Luca Agnello & Ricardo M. Sousa, 2012. "Fiscall Adjustments and Income Inequality:A First Assessment," NIPE Working Papers 19/2012, NIPE - Universidade do Minho.
    12. Luca Agnello & Ricardo M. Sousa, 2014. "How Does Fiscal Consolidation Impact on Income Inequality?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 702-726, December.
    13. repec:eee:deveco:v:130:y:2018:i:c:p:127-144 is not listed on IDEAS
    14. G. Bellettini & F. Delbono, 2013. "Persistence of high income inequality and banking crises: 1980-2010," Working Papers wp885, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. 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

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation


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