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Financial development and top income shares in OECD countries
Author(s) -
Saha Anjan K.,
Mishra Vinod,
Smyth Russell
Publication year - 2021
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12472
Subject(s) - income shares , economics , estimation , distribution (mathematics) , econometrics , panel data , income distribution , generalized method of moments , demographic economics , monetary economics , inequality , mathematics , mathematical analysis , management
We examine the causal impact of financial development (FD) on top income shares for a panel of 14 OECD countries—five Anglo‐Saxon countries, eight continental European countries, and Japan—over a 110‐year period. In our main General Method of Moments estimates, we find that a 1‐percentage‐point change in FD increases the top 1% income share by 0.2%. In distribution terms, a 1‐ SD incr=ease in FD increases the top 1% income share by around 0.4 of an SD . The effects are robust to various measures of top income shares and FD and alternative estimation techniques, including nonparametric estimation. FD is typically viewed in positive terms in that it makes it easier to access credit and facilitates economic growth. Our results are important because they contribute to understanding of the potential negative effects of FD.