The Impact Of Financial Development On Society 's Inequality Gap

931 WordsJun 17, 20164 Pages
Cagetti and Nardi (2006) argue that financial development is beneficial to the individuals who have higher ability to make investment and then become the entrepreneurs. In contrast, the individuals who are relatively more common could not make human investment and then become the workers. Therefore, the whole society’s inequality gap will be widen. Maurer and Haber (2003) suggest that in the process of financial liberalization and financial deepening, the financing channels for low income people are not have effectively developed, and the difficulties for financing are not have substantial progress. On the contrary, the rich have more capital and convenience to get access into the financial activities and services and get more money. Empirical researches have been conducted to test these alternative theories. Li , Squire and Zou (1998) adopt 2480 observations on Gini coefficients covering 112 developing and developed countries for the time period from 1947 to 1994. The results broadly confirm the two propositions. The first proposition is income inequality is relatively stable within countries. Income inequality is varies significantly across countries is the second proposition. They suggest that the financial development mitigate the most low income families’ liquidity constraint and improve their ability of get higher income. According to their empirical analysis, the financial development has a negative impact on the income inequality which measured by the Gini
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