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Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL

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  • Haffejee, muhammad Ismail
  • Masih, Mansur

Abstract

Income inequality in South Africa has been increasing from a Gini-coefficient height of 0.57 in 2000 to 0.65 in 2014. It is therefore important to investigate whether, in a developing economy, financial sector development reduces or worsens income inequality by mobilising and allocating savings into productive investments. For this purpose, South Africa, with arguably the second-largest economy in Africa, has been identified. The Non-linear Auto Regressive Distributed Lag (NARDL) technique advanced by Shin et. al. (2014) has been applied. This paper contributes to existing literature both in terms of being country-specific as well as demonstrating for the first time, to the best of our knowledge, that there is no long-run asymmetry between financial development and income inequality. Our conclusions support the pressing need for double-digit economic growth in South Africa together with moderate increase in government consumption expenditures.

Suggested Citation

  • Haffejee, muhammad Ismail & Masih, Mansur, 2018. "Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL," MPRA Paper 87574, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87574
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    References listed on IDEAS

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    Cited by:

    1. Ismail, Yusra & Masih, Mansur, 2019. "Is the relationship between inflation and financial development symmetric or asymmetric? new evidence from Sudan based on NARDL," MPRA Paper 94694, University Library of Munich, Germany.
    2. Prao Yao Séraphin & Kongoza Kouassi Cyrille, 2023. "Nonlinear Effect of Financial Development on Income Inequality: The Case of Ivory Coast," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(6), pages 1-57, February.
    3. Hinaunye Eita & Mduduzi Biyase & Thomas Udimal & Talent Zwane, 2022. "Does military spending affect inequality in South Africa? A revisit," Economics Working Papers edwrg-03-2022, College of Business and Economics, University of Johannesburg, South Africa, revised 2022.

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    More about this item

    Keywords

    Financial development; Income Inequality; South Africa; NARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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