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Finance and Inequality

Author

Listed:
  • Mr. Martin Cihak
  • Ms. Ratna Sahay

Abstract

The study examines empirical relationships between income inequality and three features of finance: depth (financial sector size relative to the economy), inclusion (access to and use of financial services by individuals and firms), and stability (absence of financial distress). Using new data covering a wide range of countries, the analysis finds that the financial sector can play a role in reducing inequality, complementing redistributive fiscal policy. By expanding the provision of financial services to low-income households and small businesses, it can serve as a powerful lever in helping create a more inclusive society but—if not well managed—it can amplify inequalities.

Suggested Citation

  • Mr. Martin Cihak & Ms. Ratna Sahay, 2020. "Finance and Inequality," IMF Staff Discussion Notes 2020/001, International Monetary Fund.
    • Handle: RePEc:imf:imfsdn:2020/001
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