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Income inequality and financial reform in Asia: the role of human capital

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  • Jie Li
  • Han Yu

Abstract

We investigate whether financial reform can reduce income inequality in Asia, with particular emphasis on the role of human capital. Extending Galor and Zeira (1993), we demonstrate that financial reform is effective in reducing income inequality, and the effect is more profound in a country with higher human capital. Using the data for 18 countries in Asia, the region with the most promising financial reform, we confirm our theoretical finding. In addition, among disaggregated financial reforms, lift of credit control, better banking supervision and security market development seem to be significantly associated with reduction of income inequality.

Suggested Citation

  • Jie Li & Han Yu, 2014. "Income inequality and financial reform in Asia: the role of human capital," Applied Economics, Taylor & Francis Journals, vol. 46(24), pages 2920-2935, August.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:24:p:2920-2935
    DOI: 10.1080/00036846.2014.916390
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