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Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL

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  • Haffejee, muhammad Ismail
  • Masih, Mansur

Abstract

Income inequality in South Africa has been increasing from a Gini-coefficient height of 0.57 in 2000 to 0.65 in 2014. It is therefore important to investigate whether, in a developing economy, financial sector development reduces or worsens income inequality by mobilising and allocating savings into productive investments. For this purpose, South Africa, with arguably the second-largest economy in Africa, has been identified. The Non-linear Auto Regressive Distributed Lag (NARDL) technique advanced by Shin et. al. (2014) has been applied. This paper contributes to existing literature both in terms of being country-specific as well as demonstrating for the first time, to the best of our knowledge, that there is no long-run asymmetry between financial development and income inequality. Our conclusions support the pressing need for double-digit economic growth in South Africa together with moderate increase in government consumption expenditures.

Suggested Citation

  • Haffejee, muhammad Ismail & Masih, Mansur, 2018. "Is the relationship between financial development and income inequality symmetric or asymmetric ? new evidence from South Africa based on NARDL," MPRA Paper 87574, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87574
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    References listed on IDEAS

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    Cited by:

    1. Ismail, Yusra & Masih, Mansur, 2019. "Is the relationship between inflation and financial development symmetric or asymmetric? new evidence from Sudan based on NARDL," MPRA Paper 94694, University Library of Munich, Germany.
    2. Lavisa Tala, 2024. "Economic Growth Effects of Fiscal Policy in South Africa: Empirical Evidence from Personal Income Tax," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 1-11, May.
    3. Prao Yao Séraphin & Kongoza Kouassi Cyrille, 2023. "Nonlinear Effect of Financial Development on Income Inequality: The Case of Ivory Coast," International Journal of Business and Management, Canadian Center of Science and Education, vol. 17(6), pages 1-57, February.
    4. Hinaunye Eita & Mduduzi Biyase & Thomas Udimal & Talent Zwane, 2022. "Does military spending affect inequality in South Africa? A revisit," Economics Working Papers edwrg-03-2022, College of Business and Economics, University of Johannesburg, South Africa, revised 2022.

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    More about this item

    Keywords

    Financial development; Income Inequality; South Africa; NARDL;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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