Finance-inequality nexus: the long and the short of it

Makhlouf, Y., Kellard, N. M. and Vinogradov, D. (2020) Finance-inequality nexus: the long and the short of it. Economic Inquiry, 58(4), pp. 1977-1994. (doi: 10.1111/ecin.12918)

Abstract

Financial development affects income inequality differently in the short and in the long term. Investigating OECD countries from 1870–2011, we find in the short run, an improvement in financial development tends to reduce inequality, while in the long run, more finance contributes to more inequality. The short‐run effect concurs with theories advocating financial development increases the availability of financial services, primarily for the poor. However, this effect becomes nil within a few years. Results thus imply that policies aimed at reducing inequality through improving access of the poor to finance need to be carefully designed to ensure longevity of impact. (JEL O15, O16, D31, G20, E44)

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Vinogradov, Professor Dmitri
• Authors: Makhlouf, Y., Kellard, N. M., and Vinogradov, D.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Economic Inquiry
• Publisher: Wiley
• ISSN: 0095-2583
• ISSN (Online): 1465-7295
• Published Online: 28 June 2020
• Copyright Holders: Copyright © 2020 The Authors
• First Published: First published in Economic Inquiry 58(4):1977-1994
• Publisher Policy: Reproduced under a Creative Commons license