The voluminous empirical research on the effect of financial development on income inequality has yielded mixed results. In this paper, we collect 2127 estimates reported in 116 published studies that investigate the effect of financial development on income inequality. Although our initial tests for publication bias (which do not account for moderator variables) show that the current literature does not suffer from publication selectivity, once we control for a set of moderator variables, we find evidence of mild publication bias in favor of positive estimates (i.e., the current literature favors the publication of studies that find that financial development increases income inequality). In addition, our results suggest that the overall effect of financial development on income inequality is on average zero, but that its sign and magnitude depend systematically on various study characteristics. The characteristics of data and estimation methods, whether endogeneity is taken into account, the different measures of financial development and the inclusion of financial openness, inflation and income variables in the regressions matter significantly for the effect of financial development on inequality.

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Purpose This paper aims to provide new insights regarding the impact of International Monetary Fund (IMF) programs on income inequality. Design/methodology/approach The paper uses a novel methodological approach proposed by Acemoglu et al. (2019), using (1) the regression adjustment, (2) the inverse probability weighting and (3) the doubly robust estimator, which combines (1) and (2), and a sample of annual data for 135 developing countries over the time period 1970 to 2015. Findings The findings show that IMF programs are associated with greater income inequality for up to five years. By differentiating the effect of IMF programs, the authors find that only IMF non-concessional programs have a significant detrimental effect on income inequality, while IMF concessional programs do not have a consistent effect on income inequality. In addition, the authors find that only IMF programs with a higher number of conditions have a detrimental and statistically significant effect on income inequality, compared to IMF programs with a smaller number of conditions, where their effect on income inequality is found to be insignificant. Originality/value To the best of the authors’ knowledge, the analysis developed in this paper contributes to the existing literature by applying the most methodologically sound identification strategy, which does not rely on the linearity assumption, the selection of instruments or matching variables and additionally takes into account the selection bias related to IMF program participation.