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How has financial deepening affected poverty reduction in India? : empirical analysis using state-level panel data

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  • Inoue, Takeshi
  • Hamori, Shigeyuki

Abstract

This paper examines empirically whether financial deepening has contributed to poverty reduction in India. Using unbalanced panel data for 28 states and union territories between 1973 and 2004, we estimate models in which the poverty ratio is explained by financial deepening, controlling for international openness, inflation rate, and economic growth. From the dynamic generalised method of moments (GMM) estimation, we find that financial deepening and economic growth alleviate poverty, while international openness and the inflation rate have the opposite effect. These results are robust to changes in the poverty ratios in rural areas, urban areas, and the whole economy.

Suggested Citation

  • Inoue, Takeshi & Hamori, Shigeyuki, 2010. "How has financial deepening affected poverty reduction in India? : empirical analysis using state-level panel data," IDE Discussion Papers 249, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper249
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    More about this item

    Keywords

    India; Finance; Poverty; Poverty Reduction; GMM; Financial Deepening;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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