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On the impact of financial development on income distribution: time-series evidence

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  • Mohsen Bahmani-Oskooee
  • Ruixin Zhang

Abstract

Financial market development is said to have equalizing or unequalizing effects on income distribution. Previous research used cross-sectional and panel data and provided mixed results. Suspecting that they suffer from aggregation bias, we adhere to time-series data and error-correction modeling technique and address the issue one more time in each of the 17 countries for which we have time-series data. In 10 counties, short-run effects of financial market development on income distribution were found to be equalizing. In five countries, the effects were unequalizing. However, the equalizing effects lasted into the long run only in three countries of Denmark, Kenya and Turkey.

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  • Mohsen Bahmani-Oskooee & Ruixin Zhang, 2015. "On the impact of financial development on income distribution: time-series evidence," Applied Economics, Taylor & Francis Journals, vol. 47(12), pages 1248-1271, March.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:12:p:1248-1271
    DOI: 10.1080/00036846.2014.993135
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    3. de Haan, Jakob & Sturm, Jan-Egbert, 2017. "Finance and income inequality: A review and new evidence," European Journal of Political Economy, Elsevier, vol. 50(C), pages 171-195.
    4. Bolarinwa, Segun Thompson & Akinlo, Anthony Enisan, 2021. "Is there a nonlinear relationship between financial development and income inequality in Africa? Evidence from dynamic panel threshold," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    5. Ahmed, Azleen Rosemy & Masih, Mansur, 2017. "What is the link between financial development and income inequality? evidence from Malaysia," MPRA Paper 79416, University Library of Munich, Germany.
    6. Sturm, Jan-Egbert & De Haan, Jakob, 2016. "Finance and income inequality revisited," VfS Annual Conference 2016 (Augsburg): Demographic Change 145660, Verein für Socialpolitik / German Economic Association.
    7. Thornton, John & Tommaso, Caterina Di, 2020. "The long-run relationship between finance and income inequality: Evidence from panel data," Finance Research Letters, Elsevier, vol. 32(C).
    8. Majeed, Muhammad Tariq, 2015. "Distributional Consequences of Remittances: Evidence from Sixty-Five Developing Countries," MPRA Paper 88673, University Library of Munich, Germany, revised 2016.
    9. YOUNSI, Moheddine & BECHTINI, Marwa, 2018. "Economic Growth, Financial Development and Income Inequality in BRICS Countries: Evidence from Panel Granger Causality Tests," MPRA Paper 85182, University Library of Munich, Germany.
    10. Gislain Stéphane Gandjon Fankem & Marthe Dorelle Melingui, 2021. "Le développement financier affecte‐t‐il l'inégalité de revenus en Afrique subsaharienne?," African Development Review, African Development Bank, vol. 33(4), pages 620-633, December.
    11. Mansor Ibrahim, 2018. "Finance And Inequality In Eight Asian Countries: Does Size Matter," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(1), pages 1-24, July.
    12. Nandelenga, Martin Wafula & Oduor, Jacob, 2020. "Asymmetric analysis of finance - Inequality nexus: Evidence from sub-Saharan Africa," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    13. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.

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