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Bank regulations and income inequality: Empirical evidence

Manthos, Delis and Iftekhar, Hasan and Pantelis, Kazakis (2010): Bank regulations and income inequality: Empirical evidence.

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Abstract

This paper provides cross-country evidence that variations in bank regulatory policies result in differences in income distribution. In particular, market discipline (private monitoring) and activity restrictions have an unambiguously positive and significant effect on income inequality and poverty, and this effect holds regardless of the level of economic and institutional development. In contrast, more stringent bank capital regulation and enhanced official supervisory power tend to reduce income inequality. However, this latter effect fades away for countries with low levels of economic and institutional development. We contend that these findings have new implications for the effects of bank regulations besides those related to their impact on financial stability.

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