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Economic Growth, Financial Development, and Income Inequality

Author

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  • Park, Donghyun

    (Asian Development Bank)

  • Shin, Kwanho

    (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

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

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    References listed on IDEAS

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    1. 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.
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    3. repec:hal:pseose:halshs-00944873 is not listed on IDEAS
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    6. 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.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial development; growth; income inequality;
    All these keywords.

    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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