Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation1

Abstract

We propose a coherent unified approach to the study of the linkages among economic growth, financial structure, and inequality, bringing together disparate theoretical and empirical literature. That is, we show how to conduct model‐based quantitative research on transitional paths. With analytical and numerical methods, we calibrate and make tractable a prototype canonical model and take it to an application, namely, Thailand 1976–1996, an emerging market economy in a phase of economic expansion with uneven financial deepening and increasing inequality. We look at the expected path generated by the model and conduct robustness experiments. Because the actual path of the Thai economy is imagined here to be just one realization of many possible histories of the model economy, we construct a covariance‐normalized squared error metric of closeness and find the best‐fit simulation. We also construct a confidence region from a set of simulations and formally test the model. We broadly replicate the actual data and identify anomalies.

Türkiye de Finansal Gelişim ve Gelir Dağılımı İlişkisi: Finansal Kuznets Eğrisi

“…Kalkınmanın son aşamasında, toplumun tüm kesimleri arasındaki gelir dağılımı dengelenecek ve ekonomik büyüme belirli bir noktaya doğru yakınsayacaktır. Townsend ve Ueda (2006) tarafından ortaya konulan benzer bir argümanda ekonomik büyüme ve eşitsizliği değiştirmek için yüksek getirili yatırımların tanımlanmasında finansal sistemin öneminin kritik olduğu vurgulanmaktadır.…”

Microsimulation as a tool for evaluating redistribution policies

“…Available models tend to concentrate on some specific behaviour, abstracting from other important components of the demo-economic life-cycle. For instance, Townsend (2002), Townsend and Ueda (2003), Giné and Townsend (2004) concentrate on saving/investment behaviour under uncertainty and in different financial market environments, whereas Heckman, Lochner and Taber (1998) focus on schooling and training behaviour. Although important in their own right, such models are specialized and do not permit analyzing tax-benefit systems in all their dimensions.…”

Financial Development, Urbanization, and Urban-Rural Income Disparity: Evidence Based on Chinese Provincial Data

“…The theoretical models of Greenwood & Javanovic [11] and Townsend & Ueda [12] show that the existence of financial threshold will lead to the initial low income people are excluded from the financial system and cannot access the financial resources and services provided by financial institutions under the financial repression. The high income people who are rich at the beginning are able and willing to pay a certain amount of financial resources and services investment in high-yielding production, investment and construction projects.…”

“…As a result, the income gap will tend to narrow until the income distribution pattern eventually stabilized at the equilibrium point. Obviously, the classical GJ model extends the Kuznets' "inverted By the GJ classical model, Townsend & Ueda [12] simplified and improved the model, and constructed a complete dynamic model. They used non-stationary and non-linear dynamic programming method to empirically explore the impact of financial development on income distribution mechanism.…”