Financial Development and Income and Wealth Inequalities: Trade Globalization Matters

IntroductionRising income and wealth inequalities are the most challenging issues in countries around the world nowadays.Concerns arise because excessive inequality tilts institutions and reduces equal opportunities, damaging long-run economic growth.Therefore, understanding the determinants of inequality is important for policymaking.Among potential factors, finance is believed to play a crucial role in persistent inequality.Although there is a large body of literature that theoretically and empirically reveals the distributional impact of finance and the relevant mechanisms, whether financial development widens or narrows inequality remains controversial and unanswered (Demirguc-Kunt and Levine, 2009). This study reexamines the effect of financial development on inequality and contributes to Journal of Economic Integration