Finance, inequality and the poor

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.

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Correspondence to Thorsten Beck.

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Beck, T., Demirgüç-Kunt, A. & Levine, R. Finance, inequality and the poor. J Econ Growth 12, 27–49 (2007). https://doi.org/10.1007/s10887-007-9010-6

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Keywords

  • Financial systems
  • Income distribution
  • Economic development
  • Poverty alleviation

JEL Classifications

  • O11
  • O16
  • G00