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Finance, inequality, and poverty: cross-country evidence

  • Beck, Thorsten
  • Demirguc-Kunt, Asli
  • Levine, Ross

While substantial research finds that financial development boosts overall economic growth, the authors study whether financial development is pro-poor: Does financial development disproportionately raise the income of the poor? Using a broad cross-country sample, the authors find that the answer is yes: Financial intermediary development reduces income inequality by disproportionately boosting the income of the poor and therefore reduces poverty. This result is robust to controlling for simultaneity bias and reverse causation.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3338.

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Date of creation: 01 Jun 2004
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Handle: RePEc:wbk:wbrwps:3338
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