Financial Development and Poverty Reduction: Can There be a Benefit without a Cost?
This article investigates how financial development helps to reduce poverty directly through a distributional effect, beyond its indirect effect through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities (through the McKinnon 'conduit effect') but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is particularly detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.
Volume (Year): 47 (2011)
Issue (Month): 1 ()
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- de Melo, Jaime & Tybout, James, 1986. "The Effects of Financial Liberalization on Savings and Investment in Uruguay," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 561-87, April.
- Luc Christiaensen & Lionel Demery & Stefano Paternostro, 2003. "Macro and Micro Perspectives of Growth and Poverty in Africa," World Bank Economic Review, World Bank Group, vol. 17(3), pages 317-347, December.
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