Financial development, inequality, and poverty: Some international evidence

This paper provides evidence for the relationship between financial development, income inequality, and poverty. Unlike the existing literature, which mainly studies the effects of financial deepening, this paper features a multidimensional investigation. We considered financial access, depth, efficiency, stability, and liberalization. This paper reports three major findings. First, four out of five dimensions of financial development (access, depth, efficiency, and stability) can significantly reduce inequality and poverty. Second, financial liberalizations tend to exacerbate inequality and poverty. Third, the development of the banking shows a more significant impact on income distribution than the development of the stock market.