The long-run relationship between finance and income inequality: Evidence from panel data

Thornton, John; Tommaso, Caterina Di

doi:10.1016/j.frl.2019.04.036

Cited by 33 publications

(20 citation statements)

References 37 publications

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“…Thus, at the initial stage of economic development, only the high-income individual, elites and firms access the benefits from the financial development and markets. This is partly due to imperfections, frictions, market failure and poor institutional framework associated with the initial development in the financial markets as currently witnessed in developing economies and Africa in particular (Law et al , 2014; Thornton and Tommaso, 2020). However, as the financial markets become more developed, the imperfections are reduced and then a large proportion of the society including the poor can access the benefits emanating from the financial development.…”

Section: Introductionmentioning

confidence: 99%

Is there a nonlinear relationship between financial development and poverty in Africa?

Bolarinwa¹,

Adegboye

2021

JES

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PurposeThe paper examines whether there is a threshold between financial development and poverty in African economies.Design/methodology/approachThe study adopts the innovative dynamic panel threshold model of Seo and Shin (2016) made practicable by Seo et al. (2019)–the model estimates threshold relationship even in the presence of endogeneity. Also, following the recommendations of Cihak et al. (2013) and Sahay et al. (2015), we also adopt a robust measure of financial development based on the four pillars of financial deepening, stability, efficiency and access derived from the principal component analysis (PCA).FindingsThe empirical results show that there exists a threshold level of financial development necessary for poverty reduction in Africa.Research limitations/implicationsOur result is important for policy formulations. First, individual African country must discover the level of financial development necessary for spurring poverty reduction. Second, policymakers, especially in lower-income countries, must keep improving their financial sector development to achieve the threshold level necessary for achieving poverty reduction even though financial development might seem less relevant at its present level.Practical implicationsThe policymakers in Africa should note that there exists a threshold level of financial development that reduces poverty. Hence, the present level of financial development might have not yielded a considerate effect on poverty. Still, the policymakers must keep pushing on until the threshold is achieved.Social implicationsFinancial development reduces poverty level but it must reach a certain threshold level before it does so. So, we advise African policymakers to continue to develop their financial sector to achieve this threshold.Originality/valueThis seems to be the first work to document the threshold relationship using the dynamic panel threshold. Besides, the study specifically concentrates on Africa dividing the continent into different income levels. Moreover, we adopt a robust measure of financial development unlike extant studies on Africa.

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Section: Introductionmentioning

confidence: 99%

Is there a nonlinear relationship between financial development and poverty in Africa?

Bolarinwa¹,

Adegboye

2021

JES

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“…Meanwhile, in the United States, Bittencourt et al (2019) state that the effect of financial development seems to differ according to the level of inequality in each state, with the effect increasing in states with above‐average inequality, while an inverted U‐shaped relationship is observed in states with below‐average inequality. Some studies show favorable results that validate a financial Kuznets hypothesis (Gharleghi & Jahanshahi, 2020; Thornton & Tommaso, 2020; Van Velthoven et al, 2019).…”

Section: Literature Reviewmentioning

confidence: 85%

Impact factors and space‐time characteristics of income inequality in a global sample

Quito

Río‐Rama

Álvarez‐García

et al. 2022

Sustainable Development

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Inequality has been of growing interest in the political debate and in theoretical and empirical studies for some decades. Therefore, the study of regional inequality raises some relevant questions related to the spatial nature of the data. In fact, adopting a regional point of view implies the opportunity to consider spatial interactions, which traditional studies do not include in their analyses. Therefore, the study aims to analyze income inequality before (GINI1) and after (GINI2) income and transfers, using a data

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“…The effect of financial development on economic growth and the effect of economic growth on income inequality have been explored by Greenwood and Javonavic (1990). Following these studies, Bittencourt (2010); Kappel (2010); Shahbaz and Islam (2011); Tan and Law (2012); Akbiyik (2012); Kanberoğlu and Arvas (2014); Shahbaz et al (2014); In the studies conducted by Support et al (2017); Anggraeni and Nugroho (2020); Thornton and Tommaso (2020); Support et al, (2020); Kuscuoglu and Cicek (2021); Rachmawati et al, (2021) On the other hand, studies by Sehrawat and Giri (2015), Akıncı and Akıncı (2016), Topuz and Dağdemir (2016), and Jung and Cha (2021) reveal that financial development has an increasing effect on income inequality. On the other hand, Shari (2000), Nolan and Maitre (2008), Rubin and Segal (2015) argue that economic growth has an increasing effect on income Financial Development and Income Inequality in Countries Murat TEKBAŞ 719 inequality and they state that it has a positive effect in urban areas.…”

Section: Literature Reviewmentioning

confidence: 99%

The Relationship of Economic Growth, Financial Development and Income Inequality in Asean-5 Countries

Tekbaş

2022

Mehmet Akif Ersoy Üniversitesi İktisadi Ve İdari Bilimler Fakültesi Dergisi

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Çalışmada, ASEAN-5 (Endonezya, Malezya, Tayland, Filipinler, Singapur, Vietnam) ülkelerinde ekonomik büyüme, finansal gelişme ve gelir eşitsizliği ilişkisi 1992-2014 yılları arasındaki dönem için araştırılmıştır. Çalışmada yatay kesit bağımlılığını dikkate alan ikinci nesil testlerden faydalanılmıştır. Analizler sonucunda elde edilen bulgular ASEAN-5 ülkelerinde ekonomik büyümenin gelir eşitsizliği üzerinde pozitif etkili olduğunu ve finansal gelişmenin gelir eşitsizliği üzerindeki etkisinin istatistiki olarak anlamlı olmadığını göstermektedir. Buna karşılık ülkeler bazında elde edilen sonuçların farklı olduğu görülmektedir. Dumitrescu-Hurlin Nedensellik testi sonuçları incelendiğinde ise, ekonomik büyümeden gelir eşitsizliğine ve finansal gelişmeye tek yönlü nedensellik ilişkisi olduğu görülmektedir. Elde edilen sonuçlar doğrultusunda ASEAN-5 ülkelerinin finansal yapılarının uluslararası standartlara uygun hale getirilmesi ve finansal kaynakların verimli kullanılacak alanlara yöneltilmesinin ekonomik büyüme üzerinde pozitif, gelir eşitsizliği üzerinde ise negatif etki sağlayabileceği değerlendirilmektedir.

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The long-run relationship between finance and income inequality: Evidence from panel data

Cited by 33 publications

References 37 publications

Is there a nonlinear relationship between financial development and poverty in Africa?

Is there a nonlinear relationship between financial development and poverty in Africa?

Impact factors and space‐time characteristics of income inequality in a global sample

The Relationship of Economic Growth, Financial Development and Income Inequality in Asean-5 Countries

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