Finance and income inequality in Kazakhstan: evidence since transition with policy suggestions

Abstract

Kazakhstan gained independence in 1990 and has undergone significant changes in economic, social and trade conditions since then. We analyse the effects of financial development on income inequality in Kazakhstan, incorporating economic growth, foreign investment, education and the role of democracy as the drivers. We establish that income inequality in Kazakhstan is impaired by financial development. In summary, we send the three messages for policy purposes. First, strengthening financial sector is necessary to close the gap between 'haves and have-nots'. Second, attracting foreign direct investment beyond the hydrocarbon sector is necessary to alleviate inequality. Finally, adaptation of education system to the new social and economic environment would help in improving income distribution.

Financial Market Development and Income Distribution Inequality in the Emerging Markets

“…Nevertheless, a major limitation for both of these studies is that their researches were only based on developed countries where the financial system is prudential developed and proper regulated. The financial sector in emerging countries is relatively not well-regulated compared to the developed countries (Shahbaz et al, 2017). The results, therefore, may not be applicable in explaining world inequality as a whole.…”

“…The first finding is that the financial market development could increase the income distribution inequality to some extent. (Arora, 2011;Menyah, Nazlioglu, & Wolde-Rufael, 2014;Shahbaz, Bhattacharya, & Mahalik, 2017;H. Zhang, 2016;H.-w. Zhang, Chen, & Zhang, 2011).…”

“…The worldwide financial development is directly associated with the rising distribution inequality. Moreover, Shahbaz, Bhattacharya and Mahalik (2017) in their study of finance and income inequality based on Kazakhstan did found that the there is a bidirectional causality exists between the finance and inequality. Conversely, they observed that the association between financial development and income inequality is actually following a U-shaped pattern.…”

Does Microfinance Program Innovation reduce income inequality? A cross-country analysis

“…Following preceding studies (Li et al, 1998;Beck et al, 2004Beck et al, , 2007Kim & Lin, 2011;Younsi & Bechtini, 2018;Younsi et al, 2019), we consider our dependent variable as Gini coe cient (income inequality). In line with earlier studies (Dollar & Kraay, 2002;Herzer & Vollmer, 2012;Stewart & Moslares, 2012;Stiglitz, 2012;Delbianco et al, 2014;Shahbaz et al, 2017), real GDP per capita (in constant international dollars) is considered. Furthermore, country-level control measures are included, namely, trade openness (Milanovic, 2002;Reuveny & Li, 2003;Zhu & Tre er, 2005;Silva, 2007;Dreher & Gaston, 2008;Kai & Hamori, 2009;Franco & Gerussi, 2013) and domestic credit to private sector (Beck & Levine, 2002;Beck et al, 2007;Kim & Lin, 2011;Jauch & Watzka, 2016).…”

Microfinance, Financial Development, Foreign Aid, and Income Inequality: Evidence From Sub-Saharan Africa

“…Similarly, Seven and Coskun (2016) show that financial development significantly contributes to reduce income inequality in 45 emerging countries over the period 1987-2011. Shahbaz et al (2017) examine the long-run relationship between financial development and income inequality in Kazakhstan for the period 1991-2011. Their empirical results suggest that financial development significantly reduces income inequality, while economic growth worsens it, and both trade openness and inflation raise income distribution.…”