Publicación: Rethinking the Income Inequality and Financial Development Nexus. A Study of Nine OECD Countries
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2020-07-06
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info:eu-repo/semantics/openAccess
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MDPI
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Financial crises have devastating effects in terms of income inequality. The recent financial crisis has provoked that inequality within advanced countries has returned to the prevailing levels of a century ago. In this article we look at the relationship between financial development and income inequality from a comprehensive perspective. Our hypotheses state that not only financial depth through credit expansion or capital markets activity matter in terms of income inequality, but also the financial system resilience. We look at a group of OCDE developed countries during the period 2000-2015 and the results confirm that in terms of credit provision there is a point of until which income inequality improves, but beyond this threshold further financial deepening will lead to a reverse effect, in line with the "Too much finance hypothesis". The role of capital markets exerts a widening income inequality effect while financial system resilience helps in alleviating existing income inequality. We recommend regulators and policymakers to pay more attention to financial depth variables, the behaviour of financial intermediaries and the environment in which they operate.
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Categorías UNESCO
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Financial depth, resilience, income inequality, composite indicator, crisis, banking
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Centro
Facultad de Ciencias Económicas y Empresariales
Departamento
Economía Aplicada