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Finance, inequality and the poor

Journal of Economic Growth volume 12, pages 27–49 (2007)Cite this 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.

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Authors and Affiliations

  1. The World Bank, Mail stop MC 3-300, 1818 H street N.W., Washington, DC, 20433, USA

    Thorsten Beck & Asli Demirgüç-Kunt

  2. Department of Economics, Brown University, Providence, USA

    Ross Levine

  3. National Bureau of Economic Research(NBER), Combridge, USA

    Ross Levine

Authors
  1. Thorsten Beck
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  2. Asli Demirgüç-Kunt
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  3. Ross Levine
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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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  • DOI: https://doi.org/10.1007/s10887-007-9010-6

Keywords

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

JEL Classifications

  • O11
  • O16
  • G00