Financial development, income inequality, and institutional quality: A multi-dimensional analysis

Huynh, Cong Minh; Tran, Nam Hoai

doi:10.1080/23322039.2023.2242128

Cited by 6 publications

(2 citation statements)

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“…Well-functioning institutions can mitigate the negative effects of financial development on inequality. Huynh and Tran [4] examined the relationship between financial development, institutions, and income inequality. They emphasized that the effectiveness of institutions is crucial in shaping the impact of financial development on income inequality.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In the dynamic landscape of contemporary economies, the intricate interplay between financial development and income inequality stands as a significant subject and a scholarly inquiry [1][2][3][4]. As the global economic paradigm continues to evolve, the mechanisms through which financial systems interact with income distribution patterns have garnered substantial attention from economists, policymakers, and researchers alike.…”

Section: Introductionmentioning

confidence: 99%

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How Much Financial Development Accentuates Income Inequality in Central and Eastern European Countries?

Manta,

Badareu,

Florea

et al. 2023

Sustainability

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Financial development is often associated with significant economic growth, but studies have shown that a high level of financial development can be the cause of deepening income inequality in many countries. The main objective of the proposed study is to identify to what extent financial development influences income inequality in Central and Eastern European Countries (CEEC). Thus, for the model specification we used as dependent variable the Gini coefficient and as independent variable the financial development index. The sample period for the analysis was from 2004 to 2019, restricted by the lack of data on the Gini coefficient in CEECs. Data on the financial development index were collected from International Monetary Fund, and data on the Gini coefficient were extracted from the World Bank’s Poverty and Inequality Platform. The study unravels several contributions. First of all, the use of quantile regression allowed for the examination of the effects of financial development across the entire distribution of income inequality. Second of all, the use of a comprehensive financial development index offered a more robust and comprehensive measure of financial development compared to single indicators. Taking into account that the Gini coefficient must be close to zero, this result was a positive one with, in essence, financial development reducing income inequality in CEECs. Thirdly, the specific focus on CEECs fills a gap in the literature. Finally, the findings of this study have important policy implications. The obtained results indicate a negative causal relationship between financial development and income inequality, emphasizing the fact that the relationship between these two components cannot be generalized for all regions. These might include measures to promote financial inclusion, improve financial literacy, and enhance the stability and efficiency of financial systems. Supporting financial development in CEECs and similar transition economies can be an effective strategy for tackling income inequality.

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Section: Literature Reviewmentioning

confidence: 99%