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Financial structure and income inequality

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  • Gambacorta, Leonardo
  • Brei, Michael
  • ,
Abstract
This paper empirically investigates the link between financial structure and income inequality. Using data for a panel of 97 economies over the period 1989-2012, we find that the relationship is not monotonic. Up to a point, more finance reduces income inequality. Beyond that point, inequality rises if finance is expanded via market-based financing, while it does not when finance grows via bank lending. These findings concur with a well-established literature indicating that deeper financial systems help reduce poverty and inequality in developing countries, but also with recent evidence of rising inequality in various financially advanced economies.

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  • Gambacorta, Leonardo & Brei, Michael & ,, 2018. "Financial structure and income inequality," CEPR Discussion Papers 13330, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13330
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    10. Gambacorta, Leonardo & Frost, Jon & Gambacorta, Romina, 2020. "The Matthew effect and modern finance: on the nexus between wealth inequality, financial development and financial technology," CEPR Discussion Papers 15014, C.E.P.R. Discussion Papers.
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    22. Joyce, Joseph, 2022. "The Impact of FDI Income on Income Inequality in Home Countries," MPRA Paper 114564, University Library of Munich, Germany.
    23. Arabela ICHIM & Mihaela NECULITA & Carmen GHELASE & Daniela Ancuta SARPE, 2023. "The Effect of Assortative Mating on Wealth Inequality, why do the Rich Choose the Rich?," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 134-137.
    24. Joyce, Joseph, 2021. "The International Distribution of FDI Income And Its Impact on Income Inequality," MPRA Paper 106448, University Library of Munich, Germany.

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    More about this item

    Keywords

    Inequality; Finance; Banks; Financial markets;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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