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FINANCE AND INEQUALITY: HOW DOES GLOBALIZATION CHANGE THEIR RELATIONSHIP?

Published online by Cambridge University Press:  04 June 2013

Takuma Kunieda ,
Keisuke Okada  and
Akihisa Shibata
Takuma Kunieda*
Affiliation:
City University of Hong Kong
Keisuke Okada
Affiliation:
Hiroshima Shudo University
Akihisa Shibata
Affiliation:
Kyoto University
*
Address correspondence to: Takuma Kunieda, Department of Economics and Finance, City University of Hong Kong, P7315, Academic Building, 83 Tat Chee Avenue, Kowloon Tong, Hong Kong; e-mail: [email protected].
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Abstract

This research demonstrates that international financial integration changes the way in which financial development affects inequality within a country. Specifically, both cross-country analysis and dynamic panel data analysis using data collected from more than 100 countries provide evidence indicating that if the financial market of a country is strongly closed to the world market, financial development narrows inequality within that country, whereas if the financial market of a country is strongly open to the world market, financial development widens inequality within that country. Our theoretical framework provides a possible explanation for our empirical findings.

Keywords

Financial IntegrationInequalityFinancial DevelopmentCredit Constraints
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 5 , July 2014 , pp. 1091 - 1128
Copyright
Copyright © Cambridge University Press 2013 

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