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The impact of financial deepening on income inequality: Empirical evidence from Australia
Author(s) -
Shi Yongfen,
Paul Sudeshna,
Paramati Sudharshan Reddy
Publication year - 2022
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2338
Subject(s) - economics , economic inequality , cointegration , nexus (standard) , openness to experience , per capita income , inflation (cosmology) , quantile regression , inequality , comprehensive income , macroeconomics , income distribution , foreign direct investment , investment (military) , monetary economics , econometrics , public economics , gross income , mathematics , mathematical analysis , sociology , theoretical physics , computer science , embedded system , psychology , social psychology , state income tax , physics , demography , tax reform , law , political science , politics
The present research paper is designed to explore the role of financial development indicators on income inequality in Australia using yearly data from 1980 to 2014. Our study also accounts for other potential determinants of income inequality such as inflation, per capita income and trade openness. Our results from Bayer and Hanck (2013) cointegration test confirm the long‐run equilibrium relationship across the models. Similarly, the long‐run estimates from the quantile regression models and non‐parametric approach indicate that the financial development indicators, foreign direct investment (FDI) inflows, inflation and trade openness have significant positive impact on income inequality in Australia. However, the growth in per capita income plays the opposite role. Given these findings, our study offers numerous policy and practical implications and adds an important value to the empirical literature on the nexus between financial development and income inequality.