Munich Personal RePEc Archive

Finance and Inequality: How Does Globalization Change Their Relationship?

Kunieda, Takuma and Okada, Keisuke and Shibata, Akihisa (2011): Finance and Inequality: How Does Globalization Change Their Relationship?

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Abstract

This research demonstrates that international financial integration changes the way in which financial development affects inequality within a country. Specifically, both the cross-country analysis and the dynamic panel data analysis using data collected from more than 100 countries provide evidence indicating that if the financial market of a country is highly open to the world market, financial development widens inequality within that country, whereas if the financial market of a country is highly closed to the world market, financial development narrows inequality within that country. Our theoretical framework provides a possible explanation for our empirical findings.

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