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Journal of Economic Growth

, Volume 12, Issue 1, pp 27–49 | Cite as

Finance, inequality and the poor

  • Thorsten Beck
  • Asli Demirgüç-Kunt
  • Ross Levine
Original Article

Abstract

Financial development disproportionately boosts incomes of the poorest quintile and reduces income inequality. About 40% of the long-run impact of financial development on the income growth of the poorest quintile is the result of reductions in income inequality, while 60% is due to the impact of financial development on aggregate economic growth. Furthermore, financial development is associated with a drop in the fraction of the population living on less than $ 1 a day, a result which holds when conditioning on average growth. These findings emphasize the importance of the financial system for the poor.

Keywords

Financial systems Income distribution Economic development Poverty alleviation 

JEL Classifications

O11 O16 G00 

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Thorsten Beck
    • 1
  • Asli Demirgüç-Kunt
    • 1
  • Ross Levine
    • 2
    • 3
  1. 1.The World BankWashingtonUSA
  2. 2.Department of EconomicsBrown UniversityProvidenceUSA
  3. 3.National Bureau of Economic Research(NBER)CombridgeUSA

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