What question did this study set out to answer?

To investigate whether nonlinearities and threshold effects govern the relationship between financial sector development and income inequality across countries.

January 10, 2020International Journal of Finance & Economics

Threshold effects in the relationship between financial development and income inequality

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Authors

MCMohamed ChakrounUniversity of Sfax

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Implication

Cross-sectional threshold analysis reveals nonlinear effects of financial development on income inequality across sixty nations, indicating divergent impacts of banking versus stock markets.

Key Points

To investigate whether nonlinearities and threshold effects govern the relationship between financial sector development and income inequality across countries.
Applied the instrumental variable threshold regression technique developed by Caner and Hansen (2004).
Analyzed cross-sectional data from 60 developed and developing nations, differentiating between banking sector metrics and stock market development.
Banking sector development confirmed an inverted U-shaped relationship with income inequality, supporting the Greenwood and Jovanovic hypothesis.
Stock market development showed no inverted U-shaped relationship, yielding inconclusive distribution effects in low- and lower-middle-income countries.
In the lower regime, stock market presence had negligible impact on income distribution, whereas in the higher regime, market expansion significantly increased inequality.

Cite This Study

Mohamed Chakroun (2020) studied this question.

synapsesocial.com/papers/6a8ac33bf19228bbb2fb35fd https://doi.org/10.1002/ijfe.1757

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Implication

Cross-sectional threshold analysis reveals nonlinear effects of financial development on income inequality across sixty nations, indicating divergent impacts of banking versus stock markets.

Threshold effects in the relationship between financial development and income inequality

Discussion

Member takes

Implication

Key Points

Cite This Study

Threshold effects in the relationship between financial development and income inequality

Discussion

Member takes

Implication

Key Points

Cite This Study

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