Financial Development, Inequality and Poverty: Some International Evidence

February 19, 2016

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Format: Chicago

Sami Ben Naceur, and RuiXin Zhang. Financial Development, Inequality and Poverty: Some International Evidence, (USA: International Monetary Fund, 2016) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper provides evidence on the link between financial development and income distribution. Several dimensions of financial development are considered: financial access, efficiency, stability, and liberalization. Each aspect is represented by two indicators: one related to financial institutions, and the other to financial markets. Using a sample of 143 countries from 1961 to 2011, the paper finds that four of the five dimensions of financial development can significantly reduce income inequality and poverty, except financial liberalization, which tends to exacerbate them. Also, banking sector development tends to provide a more significant impact on changing income distribution than stock market development. Together, these findings are consistent with the view that macroeconomic stability and reforms that strengthen creditor rights, contract enforcement, and financial institution regulation are needed to ensure that financial development and liberalization fully support the reduction of poverty and income equality.

Subject: Financial sector development, Income distribution, Income inequality, Poverty, Stock markets

Keywords: Income, Price index, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/032
Stock No:

WPIEA2016032
ISBN:

9781498359283
ISSN:

1018-5941

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