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Economic Growth, Financial Development, and Income Inequality

Author

Listed:
  • Donghyun Park

    (Asian Development Bank)

  • Kwanho Shin

    (Korea University)

Abstract

The central objective of our paper is to empirically examine the relationship between financial development and income inequality. Theoretically, there are grounds for both a positive and negative relationship between the two variables. Our main finding is that financial development contributes to reducing inequality up to a point, but as financial development proceeds further, it contributes to greater inequality. We also find that when the ratio of primary schooling to total schooling increases and law and order improves, financial development becomes more effective in reducing inequality.

Suggested Citation

  • Donghyun Park & Kwanho Shin, 2015. "Economic Growth, Financial Development, and Income Inequality," ADB Economics Working Paper Series 441, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0441
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    References listed on IDEAS

    as
    1. Thomas Piketty & Emmanuel Saez & Stefanie Stantcheva, 2014. "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 230-271, February.
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    3. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    5. Papanek, Gustav F. & Kyn, Oldrich, 1986. "The effect on income distribution of development, the growth rate and economic strategy," Journal of Development Economics, Elsevier, vol. 23(1), pages 55-65, September.
    6. repec:hal:pseose:halshs-00944873 is not listed on IDEAS
    7. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G01 - Financial Economics - - General - - - Financial Crises
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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