Inequality and Private Credit

Diego Huerta, Ronald Fischer and Patricio Valenzuela

No 316, Documentos de Trabajo from Centro de Economía Aplicada, Universidad de Chile

Abstract: This article examines whether the direction of the effect of inequality on private credit depends on the capital constraints of individual countries, as predicted by Balmaceda and Fischer (2010). Consistent with the model’s predictions, we find that greater income inequality leads to a higher ratio of private credit to GDP in economies with low incomes and weak legal rights, whereas the reverse is true in economies with high incomes and strong legal rights.JEL classification: F34; G15; G21; G38.

Keywords: Financial development; Inequality; Legal rights; Private credit. (search for similar items in EconPapers)
Date: 2015
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Working Paper: Inequality and Private Credit (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:edj:ceauch:316

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