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Finance, inequality and the poor

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  • Thorsten Beck
  • Asli Demirgüç-Kunt
  • Ross Levine

Abstract

Financial development disproportionately boosts incomes of the poorest quintile and reduces income inequality. About 40% of the long-run impact of financial development on the income growth of the poorest quintile is the result of reductions in income inequality, while 60% is due to the impact of financial development on aggregate economic growth. Furthermore, financial development is associated with a drop in the fraction of the population living on less than $ 1 a day, a result which holds when conditioning on average growth. These findings emphasize the importance of the financial system for the poor. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
    • Handle: RePEc:kap:jecgro:v:12:y:2007:i:1:p:27-49
    DOI: 10.1007/s10887-007-9010-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial systems; Income distribution; Economic development; Poverty alleviation; O11; O16; G00;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G00 - Financial Economics - - General - - - General

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