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How do financial reforms affect inequality through financial sector competition? Evidence from Africa

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  • Asongu Simplice

    () (Yaoundé/Cameroun)

Abstract

In the first empirical study on how financial reforms have been instrumental in mitigating inequality through financial sector competition, we contribute at the same time to the macroeconomic literature on measuring financial development and respond to the growing field of economic development by means of informal sector promotion. Hitherto, unexplored financial sector concepts of formalization, semi-formalization and informalization are introduced. Four main findings are established: (1) while formal financial development decreases inequality, financial sector formalization increases it; (2) whereas semi-formal financial development increases inequality, the effect of financial semi-formalization is unclear; (3) both informal financial development and financial informalization have an income equalizing effect and; (4) non-formal financial development is pro-poor. Policy implications are discussed.

Suggested Citation

  • Asongu Simplice, 2013. "How do financial reforms affect inequality through financial sector competition? Evidence from Africa," Working Papers 13/011, African Governance and Development Institute..
  • Handle: RePEc:agd:wpaper:13/011
    as

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    References listed on IDEAS

    as
    1. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
    2. Simplice A. Asongu, 2013. "Investment And Inequality In Africa: Which Financial Channels Are Good For The Poor?," The African Finance Journal, Africagrowth Institute, vol. 15(2), pages 43-65.
    3. Simplice A. Asongu, 2013. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Journal of African Business, Taylor & Francis Journals, vol. 14(1), pages 7-18, April.
    4. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
    5. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    6. Simplice Asongu, 2015. "Financial Sector Competition and Knowledge Economy: Evidence from SSA and MENA Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(4), pages 717-748, December.
    7. Magnus Saxegaard, 2006. "Excess Liquidity and Effectiveness of Monetary Policy; Evidence from Sub-Saharan Africa," IMF Working Papers 06/115, International Monetary Fund.
    8. Asongu Simplice, 2012. "How has Mobile Banking Stimulated Financial Development in Africa?," Working Papers 12/027, African Governance and Development Institute..
    9. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    10. Asongu Simplice, 2012. "How has Mobile Banking Stimulated Financial Development in Africa?," Working Papers 12/027, African Governance and Development Institute..
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    More about this item

    Keywords

    Financial Development; Shadow Economy; Poverty; Inequality; Africa;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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