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FINANCE‐INEQUALITY NEXUS: THE LONG AND THE SHORT OF IT
Author(s) -
Makhlouf Yousef,
Kellard Neil M.,
Vinogradov Dmitri V.
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12918
Subject(s) - nexus (standard) , inequality , economics , economic inequality , finance , short run , access to finance , macroeconomics , development economics , mathematical analysis , mathematics , computer science , embedded system
Financial development affects income inequality differently in the short and in the long term. Investigating OECD countries from 1870–2011, we find in the short run, an improvement in financial development tends to reduce inequality, while in the long run, more finance contributes to more inequality. The short‐run effect concurs with theories advocating financial development increases the availability of financial services, primarily for the poor. However, this effect becomes nil within a few years. Results thus imply that policies aimed at reducing inequality through improving access of the poor to finance need to be carefully designed to ensure longevity of impact. ( JEL O15, O16, D31, G20, E44)