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Financial development, income inequality and governance institutions

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  • Cristiano Perugini
  • İpek Tekin

Abstract

The paper investigates empirically how governance institutions mediate the link between financial development and inequality. To this aim, we assemble a dataset of 48 middle- and high-income countries for the period 1996-2014. Results, obtained by means of instrumental variables dynamic panel data models, reveal that financial development is pro-inequality; however, the strength of the relationship is attenuated in contexts with stricter control of corruption, better regulatory quality, political stability and rule of law. Institutional domains less directly related to the market economy – political voice and accountability and government effectiveness – do not play any mediating role. Keywords: Financial development, Income inequality, Governance institutions. JEL: G00, G28, O15, O16,

Suggested Citation

  • Cristiano Perugini & İpek Tekin, 2022. "Financial development, income inequality and governance institutions," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 69(3), pages 353-379.
    • Handle: RePEc:voj:journl:v:69:y:2022:i:3:p:353-379:id:937
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    More about this item

    Keywords

    Financial development; Income inequality; Governance institutions;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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