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Financial Development and Inequality: Brazil 1985-99

  • Manoel F. Meyer Bittencourt

We examine the impact that financial development had on earnings inequality in Brazil in the 1980’s and 90’s. The empirical evidence, based on panel time series and time series data, shows that more broad access to financial and credit markets had a significant and robust effect in reducing inequality during the period investigated. We suggest that this is not only because the poor can invest the acquired credit in all sorts of productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by extreme inflation rates. The main implication of the results is that a seemingly non-distortionary policy, such as more credit aimed at the poor, alleviates the high inequality present in Brazil and consequently improves welfare without distorting economic efficiency.

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File URL: http://degit.sam.sdu.dk/papers/degit_11/C011_055.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c011_055.

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Length: 26 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:deg:conpap:c011_055
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  3. Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
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  7. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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  16. Manoel BITTENCOURT, 2009. "Macroeconomic Performance And Inequality: Brazil, 1983-94," The Developing Economies, Institute of Developing Economies, vol. 47(1), pages 30-52.
  17. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2004. "Finance, Inequality, and Poverty: Cross-Country Evidence," NBER Working Papers 10979, National Bureau of Economic Research, Inc.
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  23. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, March.
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