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Financial Development and Inequality: Brazil 1985-1994

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  • Manoel Bittencourt

    (School of Economics, University of Cape Town / South Africa)

Abstract

We examine the impact of financial development on earnings inequality in Brazil in the 1980s and first half of the 1990s. The evidence– based on panel-time series data and analysis–shows that financial development had a significant and robust effect in reducing inequality during the period. We suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by high rates of inflation. The main implication of the results is that a deeper and more active financial sector, alleviates the high inequality seen in Brazil without distorting economic efficiency.

Suggested Citation

  • Manoel Bittencourt, 2007. "Financial Development and Inequality: Brazil 1985-1994," Ibero America Institute for Econ. Research (IAI) Discussion Papers 164, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:164
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    Cited by:

    1. Muhammad Shahbaz & Nanthakumar Loganathan & Aviral Tiwari & Reza Sherafatian-Jahromi, 2015. "Financial Development and Income Inequality: Is There Any Financial Kuznets Curve in Iran?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, pages 357-382.
    2. Bittencourt, Manoel, 2011. "Inflation and financial development: Evidence from Brazil," Economic Modelling, Elsevier, pages 91-99.
    3. Manoel Bittencourt, 2014. "Economic Growth and Inequality: Evidence from the Young Democracies of South America," International Symposia in Economic Theory and Econometrics,in: Macroeconomic Analysis and International Finance, volume 23, pages 37-58 Emerald Publishing Ltd.
    4. Bittencourt, Manoel, 2012. "Financial development and economic growth in Latin America: Is Schumpeter right?," Journal of Policy Modeling, Elsevier, pages 341-355.
    5. Bittencourt, Manoel, 2012. "Financial development and economic growth in Latin America: Is Schumpeter right?," Journal of Policy Modeling, Elsevier, pages 341-355.
    6. Hamori, Shigeyuki & Hashiguchi, Yoshihiro, 2012. "The effect of financial deepening on inequality: Some international evidence," Journal of Asian Economics, Elsevier, pages 353-359.
    7. Manoel Bittencourt, 2010. "Financial Development and Economic Growth in Latin America: Schumpeter is Right!," Working Papers 201014, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Financial development; inequality; Brazil;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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