Description

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.

More publications in this series: Working Papers

More publications by: Sami Ben Naceur ; RuiXin Zhang