Wealth inequality and financial inclusion: Evidence from South African tax and survey records

Theoretical models show that financial inclusion reduces wealth inequality. Existing empirical models are restricted to estimates using income inequality because of a lack of cross country wealth inequality data. We used 2010-11 and 2014-5 waves of the National Income Dynamics Study combined with South African tax records to estimate wealth and income inequality. Using Re-centered Influence Function regressions on the micro-level records, we confirmed the negative cross-country relationship between financial inclusion and income inequality. Wealth inequality is different. Financial inclusion improved wealth shares of only the middle class. Because of predatory lending, expansion of credit reduced the wealth share of the poor. Improved savings by the middle class, providing better oversight over financial services targeted at the poor and removing impediments to the small business sector are pre-conditions for financial inclusion to reduce wealth inequality.     

CREDIT,HOUSING COLLATERAL,AND CONSUMPTION: EVIDENCE FROM JAPAN,THE U.K., AND THE U.S.

The consumption behavior of U.K., U.S., and Japanese households is examined and compared using a modern Ando‐Modigliani style consumption function. The models incorporate income growth expectations, income uncertainty, housing collateral, and other credit effects. These models therefore capture important parts of the financial accelerator. The evidence is that credit availability for U.K. and U.S., but not Japanese, households has undergone large shifts since 1980. The average consumption‐to‐income ratio rose in the U.K. and U.S. as mortgage down‐payment constraints eased and as the collateral role of housing wealth was enhanced by financial innovations, such as home equity loans. The estimated housing collateral effect is similar in the U.S. and U.K. In Japan, land prices (which proxy house prices) continue to negatively impact consumer spending. There are negative real interest rate effects on consumption in the U.K. and U.S. and positive effects in Japan. Overall, this implies important differences in the transmission of monetary and credit shocks in Japan versus the U.S., U.K., and other credit‐liberalized economies.     

Does the inequality-credit-crisis nexus exist? An empirical re-examination

ABSTRACT

Rajan claims that rising inequality led to financial crises through credit booms in the U.S. Kumhof and Ranciere provide a theoretical formulation for this hypothesis. However, their assertions are not supported by cross-country evidence found in the work of Bordo and Meissner. A few subsequent empirical studies, albeit inspired by this pioneering work, find new evidence not in line with its conclusion but with the Rajan hypothesis. To clarify this controversial issue, we base our study on the B-M framework, resort to different estimators, and employ more model specifications by incorporating the role of deindustrialization. We find strong evidence for the inequality-credit-crisis nexus as modelled by Kumhof et al.     

我国收入不平等、金融发展和消费需求波动的实证研究:1978～2001

本文考察了收入不平等与总消费需求变动之间的联系，在高收入地区，不平等程度越大似乎消费需求波动越大，而在低收入地区，收入不平等越大，消费需求波动反而较小。本文找到证据表明金融发展水平能有助于解释为什么收入分配在高收入和低收入地区中影响消费需求的短期波动是不同的，本文的政策含义是，加快低收入地区如中西部的经济和金融发展步伐，加大金融发展相机调整的力度。     

财富不平等会抑制金融素养对家庭借贷行为的作用效果吗*——基于CHFS数据的经验分析

本文基于2013年中国家庭金融调查（CHFS）数据,选用工具变量法,考察了金融素养对城乡家庭借贷行为影响的差异性,并验证了财富不平等扩大会抑制金融素养对家庭借贷行为的影响。研究发现：（1）金融素养是影响家庭借贷行为的重要因素。户主金融素养水平的改善显著提高了家庭发生借贷的概率与家庭借贷规模。（2）金融素养对城乡家庭借贷行为的影响存在明显差异,金融素养的提高对信贷约束较为严重的农村家庭借贷行为的促进作用更大。（3）财富不平等对家庭借贷行为存在明显的抑制作用,财富不平等的扩大减少了家庭借贷需求,降低了家庭发生借贷的概率和家庭负债规模。（4）随着家庭财富不平等程度的扩大,金融素养对家庭借贷行为的促进作用受到抑制。基于以上结论,政府应该大力开展消费者金融素养教育,注重家庭收入分配合理性,从而推动我国消费金融市场的健康发展。     

The Financial Crisis of 1929 Reexamined: The Role of Soaring Inequality

The financial crisis of 1929 that triggered the Great Depression has been endlessly studied. Still there is little consensus regarding what caused it. This article claims that wage stagnation and exploding inequality fueled three dynamics that set the stage for a financial crisis. First, consumption was constrained by the smaller share of total income accruing to workers, thereby restricting investment opportunities in the real economy. Flush with greater income and wealth, the elite flooded financial markets with credit, helping keep interest rates low and encouraging the creation of new credit instruments, some of which recycled the rich's surplus assets as debt to those less well off. Second, greater inequality pressured households to find ways to consume more in order to maintain their relative social status, resulting in reduced household saving, greater household debt, and possibly longer work hours. Third, as the rich took larger shares of income and wealth, they gained relatively more command over everything, including ideology. Reducing taxes on the rich, favoring business over labor, and failing to regulate newly evolving credit instruments flowed out of this ideology.     

Financial deepening and income inequality: Is there any financial Kuznets curve in China? The political economy analysis

The interconnectedness of financial deepening and income inequality has been a highly controversial discussion which has not been concluded despite many empirical and theoretical studies up to date. One of the basic building blocks for many research designs is the reliance upon the Kuznets inverted U-shaped curve which postulates that in the first phase of economic growth income inequality increases, peaks and then decreases to a tolerable level in the later phase after a certain income level had been attained. The role of financial deepening in financing economic growth is an indispensable and necessary condition enabling us to easily draw an analogy between financial deepening and income inequality in a financial version of the Kuznets curve. In spite of 30 years of economic and financial reforms in China, which represents a fairly young history of economic growth and development, there are many indicators that Chinese experience significantly deviates from the presupposed inverted U-shaped curve trajectory and its final equalizing effect. This paper relies on financial deepening data measured by monetary aggregate M2/GDP and domestic banking credit/GDP ratios in its claim that they significantly correlate with rising income inequality. The author’s intention consists not in claiming that financial deepening per se causes income inequality, but provides a political economy analysis of the specific institutional and power configuration which leads to their positive relationship. This configuration is determined by the prevailing banking model, the hukou system, financial repression and the decentralized authoritarian system. On the other hand, the absence of inequality-narrowing institutitons further aggravate the problem. All the aforementioned factors are geared at avoiding mechanical and spurious claims that financial deepening increases or decreases income inequality across countries. A historical institutionalism approach to explain China’s path related to the Kuznets curve prediction shows the central validity of open and inclusive institutions in generating inequality-narrowing benefits of financial deepening.     

FINANCE,DISTRIBUTION AND THE ECONOMIC OBJECTIVE OF FINANCIAL COOPERATIVE INSTITUTIONS

This paper proposes a model where the structure rather than the size of the financial sector explains its influence on income distribution. Because of information asymmetries, a financial sector dominated solely by profit‐maximizing financial intermediaries will increase income and wealth inequality as it gives preferential access to credit for high‐income agents, whereas a diversified inclusive financial sector with alternative models of finance, like cooperatives, will reduce the inequality gap. No full convergence in income distribution can be realized through finance only and there is still a need for redistribution policies. Accordingly, an objective function for cooperative financial institutions should define a desired pricing behaviour that can increase the income of members at a rate higher than the average growth rate of the economy.     

The Credit Channel of Capital Tax Policy

A neoclassical growth model is augmented by a corporate sector, financial intermediation, and a set of tax rates. In this setting, capital structure is determined by the interplay between a tax advantage of debt finance and costly state verification entailed by asymmetric information. Effects of capital tax reforms are investigated with a special focus on this micro‐founded credit channel of tax policy. The theoretical part of the paper establishes a new, institution‐based view on the motivation of debt finance in general equilibrium and derives financial and real effects of private and corporate income tax policies. Using a calibration with U.S. data, the applied part demonstrates that tax cuts cause significant adjustments of capital structure. Nevertheless, it turns out that the credit channel generates relatively small effects of tax reforms on consumption, investment, and growth.     

Inequality of Income and Consumption in the U.S.: Measuring the Trends in Inequality from 1984 to 2011 for the Same Individuals

This paper examines the distribution of income and consumption in the U.S. using one dataset that obtains measures of both income and consumption from the same set of individuals. We develop a set of inequality measures that show the increase in inequality during the past 27 years using the 1984–2011 Consumer Expenditure Survey. We find that the trends in income and consumption inequality are similar between 1984 and 2006, and diverge during and after the Great Recession. For the entire 27‐year period we find that consumption inequality increases almost as much as does income inequality.     

Income Distribution and Aggregate Saving: A Non‐Monotonic Relationship

Drawing on a panel of advanced economies, this paper documents a concave and non‐monotonic link between inequality and the aggregate household saving rate. We find that, at a low level of inequality, more inequality is associated with higher saving; but we also show that a negative relationship between inequality and saving prevails where inequality is high. Using different empirical approaches, we locate the turning point, where the marginal effect of inequality turns from positive to negative, at a net income Gini coefficient of around 30. Moreover, we show that the relationship between inequality and saving also depends on financial market conditions. While inequality increases saving, when credit is scarce it tends to reduce saving at high levels of credit. This paper primarily focuses on household saving, yet we also find some evidence for a non‐monotonic effect of inequality on private saving, national saving, and the current account balance.     

Income inequality in China: causes and policy responses

The phenomenal economic growth in China has been accompanied by a rapid increase in income inequality. This paper reviews the historical trends and patterns of income inequality in China, discusses the potential causes underlying rising income inequality, and applies the functional distribution of income approach in understanding China’s income inequality. This analytical approach highlights how rising return to capital relative to wage incomes can be an important source for increasing income inequality in China. The paper provides the evidence which shows that the rapid economic growth in China has been relying on a model that pays high returns to various kinds of capital including financial capital and real estate, while the ownership of capital is very unequal. This finding prompts us to rethink about the causes of China’s income inequality and to formulate appropriate policies based on the new way of understanding this pressing issue of income distribution in China.     

The response of household debt to income inequality shocks: a heterogeneous approach

This article explores the impact of changes in income inequality on household indebtedness using Pedroni's heterogeneous panel VAR. As a result, we find evidence in support of large cross-country heterogeneity in the responses of household leverage to income inequality shocks. We also find that such heterogeneity stems from differences in the strength of financial regulations and supervision.     

代际流动约束下生育率与收入不平等关系的国际检验

收入不平等问题和人口生育率过低问题是当下中国面临的两大难题,但目前理论界关于人口因素与收入不平等关系的研究,很少从生育率视角来考察以及考虑代际收入流动在其中的作用.文章从理论与经验两个方面来考察生育率对收入不平等的影响,理论模型表明:在关于代际收入流动的假设下,一个经济体中生育率的提高会使穷人比重提高,进而拉大收入不平等.进一步地,文章利用1970-2011年76个国家(地区)面板数据的经验研究发现:(1)总和生育率的提高会拉大收入不平等,如果每个妇女平均多生育一个孩子,将会使基尼系数增加0.025;(2)以出生率作为总和生育率替代指标的实证结果与基准结果基本一致,这说明不同生育率测算指标高度相关且可相互替代;(3)对于代际收入流动弹性越高、收入水平越低或生育率越高的国家(地区),其生育率提高对收入不平等的拉大作用越大.文章关于生育率对收入不平等影响的作用机制和异质性特征的考察,对于我国如何在实施"全面二孩"政策下寻求应对严峻的收入分配问题之策提供了国际经验和启示.     

金融发展加剧了中国收入不平等吗?——基于门槛回归模型的证据

作为现代经济的核心变量,金融发展的收入分配效应是宏观经济领域的一个新兴议题。文章系统梳理了国内外研究文献,总结金融发展影响收入不平等的传导机制,并利用中国1996-2009年省际面板数据和Hansen(1999)的门槛模型,对金融发展的收入分配效应进行了估计。研究结果表明,在样本期间内金融发展显著加剧了中国收入不平等,而且金融发展的收入分配效应表现出鲜明的门槛特征,跨越特定门槛值省区的金融发展对收入不平等的影响更大。     

GROWTH,INEQUALITY, AND ECONOMIC FREEDOM: EVIDENCE FROM THE U.S. STATES

This article returns to the discussion of how income inequality affects economic growth. The main argument of the article is that economic freedom is likely to mediate the association between inequality and growth. In a panel of 300 observations from six 5‐year periods across the 50 U.S. states, I employ five different measures of inequality. The results show that across measures, the growth effects of inequality turn more positive with more economic freedom. The moderating effects are mainly driven by measures of public sector consumption. (JEL O11, O38, O43, P48)     

Globalization and household saving: is there a link?

This article proposes that globalization can affect household saving in the long run in a number of ways. Social interactions between different cultures can induce value changes, which can result in shifts in consumption and saving behaviour. International trade allows consumers to have easier access to status goods, stimulating consumption and dampening saving. Extending from Veblen’s conspicuous consumption theory, saving may also decrease when globalization leads to greater population mobility and fosters urbanization, thus enhancing the importance of consumption as a way to display wealth. In addition, financial globalization reduces credit constraints and allows households to save less. Using cross-country data from the United Nations (UN), the OECD, and other sources, this article finds evidence that household saving declines as globalization deepens, especially in the social and cultural dimensions.     

Multidimensional Inequality Across Three Developed Countries

This paper produces comparable estimates of multidimensional inequality for the U.S., Germany, and Australia. Two alternative approaches with differing interpretations are employed. The first method projects all facets of welfare onto a single variable which is then analyzed using standard univariate techniques. The second approach establishes equivalent‐income distributions that would lead to an equalization of welfare, such that the difference between this counterfactual and the true income distribution can be measured. This difference is then interpreted as the degree of income redistribution required to offset welfare inequality. Using data on permanent incomes, health scores, years of education, and leisure times, we observe much higher levels of inequality in the U.S. than in Germany or Australia. Our results are highly statistically significant and hold over a large variety of weighting specifications.     

包容性金融发展与城乡居民收入差距*——基于中国内地省级面板数据的实证研究

本文借鉴二元经济增长模型,分析了包容性金融发展与城乡居民收入差距的关系,并采用2011—2015年中国内地省级面板数据,运用面板数据模型和系统GMM模型对理论假设进行了实证检验。实证分析发现：（1）包容性金融发展对缩小城乡居民收入差距具有明显的促进作用;（2）传统银行的金融服务成本、互联网金融的数字支持服务程度对城乡居民收入差距的影响显著为负,这表明,包容性金融发展缩小城乡居民收入差距的直接作用主要是通过降低金融服务成本实现的;（3）传统银行金融包容性在缩小城乡居民收入差距方面的作用,东部比中西部更加明显,而互联网金融包容性对城乡居民收入差距的影响在中西部地区显著。据此,本文提出,应重视包容性金融发展的收入分配效应,以缩小我国城乡居民收入差距。     

BANK COMPETITION,FINANCIAL DEVELOPMENT,AND INCOME INEQUALITY

Income inequality rises with financial development initially and then drops. We reach this conclusion by numerically solving a heterogeneous agent model parameterized to the Chinese economy. The model features a banking sector with Cournot competition, and the process of financial development in the model economy begins with the deregulation of the banking sector. Based on regressions with the fixed effects and the system generalized method of moments, the empirical analysis also suggests an inverted‐U relationship between income inequality and financial development using provincial data from China. (JEL E25, G21, G28)