Randomized trial investigates financial development's effects on income inequality across developing countries, suggesting the need for strong institutions.
Key Points
This study explores how financial development affects income inequality in 125 developing countries over two decades. It aims to understand the role of institutions and regional differences in this relationship.
Analyzed panel data from 125 developing countries between 2002-2022.
Used the IMF Financial Development Index and dynamic panel GMM estimator for the analysis.
Assessed variables like political stability, regulatory quality, and government effectiveness in relation to income inequality.
Financial development is linked to higher income inequality, favoring higher-income groups.
Political stability and regulatory quality mitigate the inequality effects of financial development.
Regional disparities are noted, with Sub-Saharan Africa, Latin America, and MENA showing stronger inequality effects.