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Bank regulations and income inequality: Empirical evidence

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  • Manthos, Delis
  • Iftekhar, Hasan
  • Pantelis, Kazakis

Abstract

This paper provides cross-country evidence that variations in bank regulatory policies result in differences in income distribution. In particular, market discipline (private monitoring) and activity restrictions have an unambiguously positive and significant effect on income inequality and poverty, and this effect holds regardless of the level of economic and institutional development. In contrast, more stringent bank capital regulation and enhanced official supervisory power tend to reduce income inequality. However, this latter effect fades away for countries with low levels of economic and institutional development. We contend that these findings have new implications for the effects of bank regulations besides those related to their impact on financial stability.

Suggested Citation

  • Manthos, Delis & Iftekhar, Hasan & Pantelis, Kazakis, 2010. "Bank regulations and income inequality: Empirical evidence," MPRA Paper 27379, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27379
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    Cited by:

    1. Degl’Innocenti, M & Fiordelisi, F & Girardone, C & Radić, N, 2018. "Competition and Risk-Taking in Investment banking," Essex Finance Centre Working Papers 21268, University of Essex, Essex Business School.
    2. repec:eee:poleco:v:50:y:2017:i:c:p:171-195 is not listed on IDEAS
    3. Oliver Denk & Boris Cournède, 2015. "Finance and income inequality in OECD countries," OECD Economics Department Working Papers 1224, OECD Publishing.
    4. repec:spr:soinre:v:136:y:2018:i:1:d:10.1007_s11205-016-1534-8 is not listed on IDEAS
    5. repec:eee:deveco:v:130:y:2018:i:c:p:113-126 is not listed on IDEAS
    6. Bumann, Silke & Lensink, Robert, 2016. "Capital account liberalization and income inequality," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 143-162.
    7. Jakob de Haan & Jan-Egbert Sturm, 2016. "How Development and Liberalisation of the Financial Sector is Related to Income Inequality: Some New Evidence," BAFFI CAREFIN Working Papers 1633, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    8. Mare, Davide Salvatore & Moreira, Fernando & Rossi, Roberto, 2017. "Nonstationary Z-Score measures," European Journal of Operational Research, Elsevier, vol. 260(1), pages 348-358.
    9. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    10. Herrala, Risto, 2014. "Forward-looking reaction to bank regulation," Working Paper Series 1645, European Central Bank.
    11. repec:eee:ecanpo:v:55:y:2017:i:c:p:169-178 is not listed on IDEAS
    12. de Haan, Jakob & Sturm, Jan-Egbert, 2017. "Finance and income inequality: A review and new evidence," European Journal of Political Economy, Elsevier, vol. 50(C), pages 171-195.
    13. Bofinger, Peter & Scheuermeyer, Philipp, 2016. "Income Distribution and Aggregate Saving: A Non-Monotonic Relationship," CEPR Discussion Papers 11435, C.E.P.R. Discussion Papers.
    14. G. C. Lim & Paul D. McNelis, 2014. "Income Inequality, Trade and Financial Openness," Melbourne Institute Working Paper Series wp2014n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    15. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo Group Munich.
    16. Scheuermeyer, Philipp & Bofinger, Peter, 2016. "Income Distribution and Household Saving: A Non-Monotonic Relationship," Annual Conference 2016 (Augsburg): Demographic Change 145901, Verein für Socialpolitik / German Economic Association.
    17. Sturm, Jan-Egbert & De Haan, Jakob, 2016. "Finance and income inequality revisited," Annual Conference 2016 (Augsburg): Demographic Change 145660, Verein für Socialpolitik / German Economic Association.
    18. repec:eee:ecmode:v:70:y:2018:i:c:p:40-55 is not listed on IDEAS

    More about this item

    Keywords

    Bank regulations; Income inequality; Cross-country panel data;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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