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Financial sector development and inequality: is there a financial Kuznets curve?

Nikoloski, Zlatko (2013) Financial sector development and inequality: is there a financial Kuznets curve? Journal of International Development, 25 (7). pp. 897-911. ISSN 0954-1748

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Identification Number: 10.1002/jid.2843

Abstract

The existing empirical knowledge in the area of financial sector development and income inequality finds evidence for the theoretical work which posits a simple, linear relationship between the two variables. In this article, we subject the extant empirical knowledge to close scrutiny and point out to a potential dynamic and endogenous relationship between financial sector development and inequality. By using dynamic multivariate panel data analysis on a carefully selected data set of income inequality data for developed and developing countries spanning the period 1962–2006, we find robust empirical evidence for the existence of an inverted U-curve relationship between financial sector development and income inequality. In that token, we confirm the theoretical stipulations of Greenwood and Jovanovic (1990) for an inverted U-curve relationship between the financial sector and income inequality.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1002/%28...
Additional Information: © 2012 John Wiley & Sons
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Sets: Research centres and groups > LSE Health
Date Deposited: 12 Sep 2012 14:13
Last Modified: 04 Jun 2014 14:16
URI: http://eprints.lse.ac.uk/id/eprint/45815

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