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Investment and inequality in Africa: which financial channels are good for the poor?

Simplice A., Asongu (2011): Investment and inequality in Africa: which financial channels are good for the poor?

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Abstract

This paper examines how domestic, foreign, private and public investments affect income-inequality through financial intermediary dynamics of depth, efficiency, activity and size. With the exception of financial allocation efficiency, financial channels of depth and activity are good for the poor as they diminish estimated household income-inequality. Financial size does not have a significant income-redistributive effect. Financial allocation efficiency has a disequalizing effect on income-distribution; implying policies designed to improve the allocation of mobilized funds to economic agents only benefit the rich to the detriment of the poor. The use of financial and investment dimensions previously missing in the literature provide new insights into the two contrasting theories in the finance-inequality nexus.

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