Kunieda, Takuma (2008): Financial Globalization and Inequality.
Download (561kB) | Preview
This paper investigates how financial globalization and financial development affect income inequality within a country. We demonstrate that when a country is financially closed to the world market, the Gini coefficient is monotonically decreasing with respect to the degree of financial development, whereas when a country becomes so small due to financial globalization that financial development in the country does not affect the world interest rate, the Gini coefficient is monotonically increasing with respect to the degree of financial development. A simple quantitative analysis for the Gini coefficients shows that income inequality in the United States is negatively affected by its financial development. In the United States, income inequality has widened since the late-1970s probably due to financial globalization and financial development.
|Item Type:||MPRA Paper|
|Original Title:||Financial Globalization and Inequality|
|Keywords:||Income inequality; Financial globalization; Financial development; Gini coefficient; Heterogeneous agents|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies
|Depositing User:||Takuma Kunieda|
|Date Deposited:||03. Nov 2008 10:56|
|Last Modified:||13. Feb 2013 05:20|
Aghion, P., G.M. Angeletos, A. Banerjee, and K. Manova, 2005, Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment, NBER working paper 11349.
Aghion, P., A. Banerjee, and T. Piketty, 1999, Dualism and Macroeconomic Volatility, Quarterly Journal of Economics 114, 1359-1397.
Aghion, P., P. Howitt, and G.L. Violante, 2002, General Purpose Technology and Wage Inequality, Journal of Economic Growth 7, 315-345.
Autor, D.H., L.F. Katz, and A.B. Krueger, 1998, Computing Inequality: Have Computers Changed the Labor Market?, Quarterly Journal of Economics 113, 1169-1213.
Banerjee, A.V. and A.F. Newman, 1993, Occupational Choice and the Process of Development, Journal of Political Economy 101, 274-298.
Caballero, R.J., E. Farhi, and P.-O. Gourinchas, 2006, An Equilibrium Model of ``Global Imbalances" and Low Interest Rates, NBER working paper 11996.
Chinn M.D., and H. Ito, 2005, Current Account Balances, Financial Development, and Institutions: Assaying the World ``Saving Glut", NBER working paper 11761.
Chinn M.D., and H. Ito, 2006, What Matters for Financial Development? Capital Controls, Institutions, and Interactions, Journal of Development Economics 81, 163-192.
Chinn M.D., and H. Ito, 2007, A New Measure of Financial Openness, Department of Economics, University of Wisconsin, mimeo.
Galor, O. and O. Moav, 2000, Ability-Biased Technological Transition, Wage Inequality, and Economic Growth, Quarterly Journal of Economics 115, 469-497.
Galor, O. and J. Zeira, 1993, Income Distribution and Macroeconomics, Review of Economic Studies 90, 35-52.
Goldberg P.K., and N. Pavcnik, 2007, Distributional Effects of Globalization in Developing Countries, Journal of Economic Literature 45, 39-82.
Greenwood, J. and B. Jovanovic, 1990, Financial Development, Growth, and the Distribution of Income, Journal of Political Economy 98, 1076-1107.
IMF, 2006, How Do Financial Systems Affect Economic Cycles?, World Economic Outlook, Chapter 4, September 2006.
Katz, L.F., and K. Murphy, 1992, Changes in Relative Wages, 1963-1987: Supply and Demand Factors, Quarterly Journal of Economics 107, 35-78.
Levine, R, 2005, Finance and Growth: Theory and Evidence, In P. Aghion and S.N. Durlauf (eds.), Handbook of Economic Growth, Chapter 12.
Levine, R, N. Loayza, and T. Beck, 1999, A New Database on Financial Development and Structure, Policy Research Working Paper: No. WPS 2146, The World Bank.
Levine, R, N. Loayza, and T. Beck, 2000, Financial Intermediation and Growth: Causality and Causes, Journal of Monetary Economics 46, 31-77.
Matsuyama, K., 2000, Endogenous Inequality, Review of Economic Studies 67, 743-759. 853-884.
Mendoza, E.G., V. Quadrini, and J-V. R'ios-Rull, 2007a, Financial Integration, Financial Deepness and Global Imbalances, NBER working paper 12909.
Mendoza, E.G., V. Quadrini, and J-V. R'ios-Rull, 2007b, On the Welfare Implications of Financial Globalization without Financial Development, NBER working paper 13412.
Piketty, T. and E. Saez, 2003, Income Inequality in the United States, 1913-1998, Quarterly Journal of Economics 118, 1-39.
Willen, P.S., 2004, Incomplete Markets and Trade, Working Paper Series No. 04-8, Federal Reserve Bank of Boston.
Wood, A., 1995, How Trade Hurt Unskilled Workers, Journal of Economic Perspectives 9, 57-80.
Wood, A., 1998, Globalization and the Rise in Labour Market Inequalities, Economic Journal 108, 1463-1482.