Financial Globalization and Inequality

Kunieda, Takuma (2008): Financial Globalization and Inequality.

Abstract

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
• Language: English
• Keywords: Income inequality; Financial globalization; Financial development; Gini coefficient; Heterogeneous agents
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; O - Economic Development, Innovation, 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

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