FINANCIAL SECTOR DEVELOPMENT AND INEQUALITY: IS THERE A FINANCIAL KUZNETS CURVE?
Article first published online: 18 MAY 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Journal of International Development
Volume 25, Issue 7, pages 897–911, October 2013
How to Cite
Nikoloski, Z. (2013), FINANCIAL SECTOR DEVELOPMENT AND INEQUALITY: IS THERE A FINANCIAL KUZNETS CURVE?. J. Int. Dev., 25: 897–911. doi: 10.1002/jid.2843
- Issue published online: 12 SEP 2013
- Article first published online: 18 MAY 2012
- Manuscript Accepted: 19 APR 2012
- Manuscript Revised: 11 APR 2012
- Manuscript Received: 12 SEP 2011
- financial sector development;
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. Copyright © 2012 John Wiley & Sons, Ltd.