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Financial structure and income inequality

Author

Listed:
  • Michael Brei

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - ULCO - Université du Littoral Côte d'Opale - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Giovanni Ferri

    (Department of Economics, LUMSA Università Maria SS. Assunta di Roma - LUMSA Università - Libera Università degli Studi Maria SS. Assunta di Roma [Italia] = Maria SS. Assunta University of Rome [Italy] = Université LUMSA [Rome, Italie])

  • Leonardo Gambacorta

Abstract

We empirically investigate whether financial structures affect income inequality. Using panel data for 97 economies covering above two decades preceding the FinTech surge we uncover a non-monotonic relationship. More finance reduces income inequality up to a certain point, beyond which inequality rises if finance expands via market-based financing, while it does not when finance grows via bank lending. The finance-inequality relationship is not structurally affected by the occurrence of crises, while it is reinforced in countries featuring a higher degree of financial openness. Financial deepening always reduces inequality when it takes the form of improved financial access.

Suggested Citation

  • Michael Brei & Giovanni Ferri & Leonardo Gambacorta, 2023. "Financial structure and income inequality," Post-Print hal-04126139, HAL.
    • Handle: RePEc:hal:journl:hal-04126139
    DOI: 10.1016/j.jimonfin.2023.102807
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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