Financial development and income inequality: A meta‐analysis

Abstract

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.

Income Inequalities in Capitalistic and Socialistic Economies: “An empirical evidence from capitalistic and socialistic countries

“…The Panel root results given in Chletsos and Fatouros (2016). On the other side, economic growth indicates a positive and significant relationship with income inequality.…”

“…García-Peñalosa (1999) examined the employment's impact in association with the agriculture sector on income inequality in developed economies and developing economies as well and results indicated a lower level of income inequality in the agrarian sector followed by a high employment ratio in that particular sector, as the benefits through agricultural output assist the lower-income groups to enjoy a rise in income. Chletsos and Fatouros (2016) empirically analyzed the consequence of income inequality on economic development designing panel of 126 countries from 1968 to 2007 and the conclusion revealed a positive consequence in line with government revenues. Maestri (2012) studied the analogy of inflation and unemployment on income inequality for the Organization for Economic Co-operation and Development (OECD) and came up with the deduction that inflation caused a hike in income inequality in countries like the United States (USA) Germany and Sweden, while Canada experienced a diminishing trend in income inequality.…”

Income composition inequality of Chinese residents and fiscal redistribution effect: An empirical analysis on individual income tax and transfer system

“…Chletsos and Sintos (2023) [ 30 ] proposed that the overall impact of financial development on income inequality averages to zero but varies systematically based on study characteristics. In contrast, Chletsos and Sintos (2022) [ 31 ] found that IMF programs are associated with increased income inequality for up to five years. Heimberger (2020) [ 32 ] utilized a new dataset with 1254 observations from 123 primary studies, employing meta-analysis and meta‐regression techniques, and discovered that financial globalization has a more significant and markedly stronger impact on increasing inequality.…”

“…Additionally, inflation plays a substantial role in income distribution. Sintos (2023) [29] discovered that factors such as price stability, financial deepening, development level, state employment, and fiscal redistribution enhance income equality in a given country. Furthermore, low inflation strengthens the income-equalizing effect of fiscal redistribution.…”

Financial Development and Income Inequality in Nigeria: Testing the Financial Kuznets Curve Hypothesis

“…This can have various social, economic, and political implications. Factors contributing to income inequality can include differences in education, skills, employment opportunities, inheritance, and government policies (Chletsos, & Sintos, 2023). Income inequality can lead to various social and economic challenges, including reduced social mobility, increased poverty rates, and potential negative effects on overall economic growth.…”