Inequality and the finance you know: does economic literacy matter?
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In a sample of advanced and developing countries observed over the 1980–2007 period, this paper documents that the ability to use financial instruments and deal with financial market complexity that indicators of economic literacy proxy for is significantly and robustly associated to a lower variation in income inequality. The direct association between financial development and inequality usually referred to as the “finance-inequality nexus”, instead, is not significant in long-run regressions that control for the level of economic literacy nor in panel regressions.
KeywordsInequality Financial development Economic literacy
JEL ClassificationA2 I3 O1
I thank Tullio Jappelli, Maela Giofrè, Chiara Daniela Pronzato, Serena Trucchi, participants at the 7th Max Weber Fellows June Conference and at the CeRP Conference on “Financial Literacy, Saving and Retirement in Aging Society” for their helpful comments. The usual disclaimer applies.
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