The effect of financial deepening on inequality: Some international evidence

This paper uses an unbalanced panel data analysis of 126 countries for the period 1963–2002 to analyze the effects of financial deepening on inequality. The principal findings can be summarized as follows: (1) financial deepening reduces inequality; (2) economic growth reduces the equalizing effects of financial deepening; (3) inequality increases with an increase in trade openness; (4) the disequalizing effects of trade openness decrease as a country grows; (5) financial deepening and trade openness therefore have asymmetric effects on inequality; and (6) these effects are robust to the choice of financial variables, inequality measures, and model specifications.     

THE DETERMINANTS OF FINANCIAL DEVELOPMENT: INSTITUTIONS, OPENNESS AND FINANCIAL LIBERALISATION

This paper provides new evidence that sheds light on the influence of institutional quality, trade openness and financial liberalisation on financial market development, using data from 27 economies (the G-7, Europe, East Asia and Latin America) during 1980-2001. The dynamic panel data analysis results demonstrate that real income per capita and institutional quality are statistically significant determinants of banking sector development and capital market development. The trade openness, however, is more prominent in promoting capital market development. In terms of financial liberalisation, the empirical results suggest that domestic financial sector reforms tend to promote banking sector development, whereas stock market liberalisation is potent in delivering stock market development. Nevertheless, the financial liberalisation programmes are more responsive in developed economies.     

Trade liberalization and income inequality: The case for Pakistan

Trade liberalization policies have been adopted by many developing countries to increase economic growth and reduce poverty. While the positive relationship between trade liberalization and economic growth is generally well accepted, the impact of trade liberalization on poverty and income inequality is still unclear. The objective of this paper is to use real data and real trade agreements of the state of Pakistan, to examine the predictions made by trade models about the impact of trade liberalization on income inequality. To illustrate, the impacts of several alternative bilateral and regional free trade agreements are simulated on household income and income inequality in Pakistan. The results show that trade liberalization does not always lead to a decline in income inequality in the short run. Trade agreements that do improve income equality, favor agriculture and often hinge on a decline in urban and non-farm household income. In the long run, changes in income equality are more positive, suggesting that efforts might best be applied towards improving the mobility of labor and capital.     

International trade and income distribution: reconsidering the evidence

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.     

LIBERALISING TRADE IN SOUTH AFRICA: A SURVEY OF COMPUTABLE GENERAL EQUILIBRIUM STUDIES

This paper reviews applications of computable general equilibrium models to trade liberalisation in South Africa. It focuses on economic structure, data, macroeconomic closure and results of the models. The models project that trade liberalisation has had small positive impacts on growth. Poverty and inequality outcomes are less clear cut and depend on the model used. Models with fully integrated micro data find that poverty has worsened slightly while inequality has risen. Aggregated models predict that poverty has been reduced by small amounts. Dynamic models report rising inequality but falling poverty incidence. The paper identifies areas for future research.     

Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment

This paper investigates how financial, trade, institutional and political liberalisation policies have affected financial sector competition in Africa using updated data to appraise second‐generation reforms. The “freedom to trade” and “economic freedom” indices are employed. Hitherto, unexplored financial sector concepts of formalisation, semi‐formalisation, informalisation and non‐formalisation are also introduced. The following findings are established. First, relative to money supply, (i) with the exception of the economic freedom mechanism, liberalisation policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (ii) apart from the foreign direct investment and economic freedom channels, liberalisation policies have been fruitful for semi‐formal financial development at the cost of other financial sectors and; (iii) with the exception of economic freedom, both the informal and non‐formal sectors have developed owing to liberalisation to the detriment of the formal financial sector. Second, relative to gross domestic product, the semi‐formal, informal and/or non‐formal financial sectors have also generally improved as a result of liberalisation. Policy implications are discussed.     

Finance and Income Inequality: What Do the Data Tell Us?

Although there are distinct conjectures about the relationship between finance and income inequality, little empirical research compares their explanatory power. We examine the relationship between finance and income inequality for 83 countries between 1960 and 1995. Because financial development might be endogenous, we use instruments from the literature on law, finance, and growth to control for this. Our results suggest that, in the long run, inequality is less when financial development is greater, consistent with Galor and Zeira (1993) and Banerjee and Newman (1993). Although the results also suggest that inequality might increase as financial sector development increases at very low levels of financial sector development, as suggested by Greenwood and Jovanovic (1990), this result is not robust. We reject the hypothesis that financial development benefits only the rich. Our results thus suggest that in addition to improving growth, financial development also reduces inequality.     

收入分配、医疗资源与人口健康:一个跨国研究

收入分配与人口健康的关系是一个争论已久的问题。本文在总结各种理论假说和以往实证研究的基础上,使用新的、质量较好的跨国面板数据,重新检验了收入分配与人口健康的关系。本文的分析重点有二:一是收入分配对人口健康的滞后影响;二是医疗资源在收入分配与人口健康的相关关系中所起的作用。本文的主要发现是,收入不均对人口健康的确有不利影响,但这种不利影响需要10年或更长的滞后期才能充分显现出来,这种滞后性是以往使用固定效应模型的跨国研究未能检测到收入不均与人口健康具有负相关关系的主要原因。此外,医疗资源(特别是初级医疗资源)人均拥有量对人口健康有积极作用;医疗资源有可能通过某种不可观察固定因素对收入分配与人口健康的关系发生影响。这些发现有助于澄清关于收入分配与人口健康关系的争论,对医疗政策也有重要参考价值。     

INDONESIAN TRADE LIBERALISATION: ESTIMATING THE GAINS

Indonesia has undergone comprehensive trade liberalisation by participating in multilateral and regional trade arrangements and by conducting unilateral liberalisation. This paper evaluates the different paths of liberalisation the country has followed, and measures their effects on the economy. It considers the impact of several liberalisation scenarios: unilateral liberalisation; regional liberalisation through APEC (Asia Pacific Economic Cooperation) and AFTA (the ASEAN Free Trade Area); and multilateral trade liberalisation through the Uruguay Round (UR). The results show that the full implementation of UR and APEC liberalisation would greatly benefit Indonesia, and that unilateral liberalisation, carried out in conjunction with the UR commitment, would lead to large welfare gains. On the other hand, the creation of AFTA is expected to add little to welfare in Indonesia or in the other ASEAN member countries.     

The spatial effects of trade openness: a survey

This paper surveys the literature on the implications of trade liberalisation for intra-national economic geographies. Three results stand out. First, neither urban systems models nor new economic geography models imply a robust prediction for the impact of trade openness on spatial concentration. Whether trade promotes concentration or dispersion depends on subtle modelling choices among which it is impossible to adjudicate a priori. Second, empirical evidence mirrors the theoretical indeterminacy: a majority of cross-country studies find no significant effect of openness on urban concentration or regional inequality. Third, the available models predict that, other things equal, regions with inherently less costly access to foreign markets, such as border or port regions, stand to reap the largest gains from trade liberalisation. This prediction is confirmed by the available evidence. Whether trade liberalisation raises or lowers regional inequality therefore depends on each country’s specific geography.     

Impacts of trade liberalisation on aggregate import in Bangladesh: An ARDL Bounds test approach

Bangladesh has been liberalising its trade regime extensively since 1992 in order to achieve higher trade performance and GDP growth. However, despite the long period of liberalisation, imports are still growing faster than exports, increasing the trade deficit. Trade liberalisation is considered a crucial contributory factor. The paper examines the impact of trade liberalisation on the aggregate import in Bangladesh, using the ARDL Bounds Test approach with annual time series data from 1972–1973 to 2004–2005. Empirical results suggest that trade liberalisation through reduction of the import duty rate increases the aggregate import substantially in the short run, but insignificantly in the long run. Trade liberalisation using simplification of non-tariff measures shows a significant but low positive impact on the aggregate import in the long run. Liberalisation interaction with price decreases imports slightly hence improves the trade balance, while interaction with income increases imports slightly hence worsens the trade balance. An increase in imports is mainly stimulated by an increase in income. Moreover, higher income elasticity compared to price elasticity indicates that an effort to maintain imports at the desired level by increasing import duty could be counter balanced and ineffective. Therefore, a consistent policy to promote not only consumption of domestically produced products, but investment, production, and backward linkage industries is essential in order to improve the trade balance and GDP growth in Bangladesh.     

Trade liberalization and wage inequality: Evidence from Korea

This paper investigates the heterogeneous income distribution effects of trade liberalization using Korean survey data from years of 2000–2015. Following the Stolper-Samuelson theorem most of previous research studying the effects of trade liberalization on wage differences focus on workers’ characteristics (e.g., skilled or unskilled) while heterogeneity within the same worker group has not been yet substantially investigated. To fill this gap, this paper provides empirical evidence of wage inequality across firms within the same group of workers caused by trade liberalization, potentially implied in the new-new trade models with firm heterogeneity. Employing a difference-in-differences (DID) specification, we find that the wages of unskilled workers in Korea have increased since its FTAs with more advanced countries, such as members of EU and the US, came into effect, while the effects on the wages of skilled workers are negative but not statistically significant. We also show that wage effects are heterogeneous across firms within unskilled and skilled worker groups, while the positive effects are statistically significant and largest for unskilled workers in medium-large sized firms. These findings are in line with both traditional and new-new trade models.     

World economy,level development and income distribution: An integration of different approaches to the explanation of income inequality

The paper briefly outlines explanations of international differences in personal income distribution that have been formulated within the ‘world economy’ and the ‘level of development’ paradigm. The predictive power of the central variables of the paradigms are tested in a cross-national regression analysis with 72 countries. The regression results suggest support for hypotheses from both paradigms, but also suggest a partial integration of theoretical elements from both paradigms. The outcome of the proposed theoretical integration offers a new interpretation of the well-known curvilinear relationship between level of development and income inequality. This new view on the curvature of the relationship expects the integration into the world economy to result in increased income inequality in peripheral countries. But different from other views it is not implied that inequality is substantially reduced in development. The core and periphery position of countries in the world economy is seen to stabilize income inequality differences between these groups of countries. Under these circumstances, developing countries generally cannot be expected to reduce substantially their income inequality in the course of economic growth.     

Finance and Inequality: The Case of India

Although theory emphasizes the role of financial market frictions in explaining income inequality, there is little empirical research exploring how financial development and financial sector reforms influence the evolution of income inequality. This article examines how finance impacts income inequality in India using annual time series data for over half a century. The results indicate that while financial development helps reduce income inequality, financial liberalization seems to exacerbate it. The results are robust to the use of different measures for financial development and financial liberalization.     

全球金融危机:收入分配视角的解读

第三波全球化深刻地影响了全球收入分配的格局。在各个国家内部,收入的不平等程度在加深。发达国家收入不平等导致了宏观经济的金融化和消费者的债务积累。在积极参与全球化进程的新兴工业化国家中,不平等程度的加大压制了国内需求。为了应对金融全球化带来的风险,这些积极参与全球化进程的发展中国家或主动或被动地积累了庞大的外汇储备,从而间接地为发达国家的消费者提供债务融资。这种局面本质上就是一种无法持续的全球化。伴随着美国等发达国家房地产泡沫的破灭,美国次贷危机传导到全世界,演变成全球金融危机。     

The growth of China and India: implications and policy reform options for Malaysia

This study explores the trade‐related impacts of rapid growth of China and India on the Malaysian economy and evaluates policy options to better position Malaysia to take advantage of these changes. Higher growth in China and India is likely to raise Malaysia's national income and to expand Malaysia's natural resource and agricultural exports, while putting downward pressure on exports from some manufacturing and service sectors. Increases in the quality and variety of exports from China and India are likely to increase substantially the overall gains to Malaysia. The expansion of the natural resource sectors and the contraction of manufacturing and services reflect a Dutch‐disease effect that will raise the importance of policies to facilitate adaptation to the changing world economy and improve competitiveness. Most‐favoured‐nation (MFN) liberalisation would increase welfare, and, by increasing competitiveness, raise output and exports of key industries. Preferential liberalisation with India and completely free trade with China would provide greater market access gains than MFN reform, but neither would be as effective in increasing income as MFN liberalisation, and free trade agreements would lead to greater competitive pressure on many of Malaysia's industries than MFN liberalisation. Increased investments in education and infrastructure could boost manufacturing and services sectors in Malaysia, while improving trade logistics would benefit sectors with high transport costs, including the agricultural and resource‐based industries.     

数字普惠金融的创业效应与收入不平等:数字鸿沟还是数字红利？

数字普惠金融与实体经济之间的关系受到学界广泛关注,但其究竟是普惠的数字红利还是金融领域的数字鸿沟,这是数字普惠金融快速发展中亟需回答的重要理论与现实问题。文章通过匹配宏观统计数据和微观调查数据,实证研究了数字普惠金融的发展对收入不平等的影响,并从创业效应这一渠道进行了机制分析。研究发现：数字普惠金融的发展总体上改善了收入不平等状况,而数字普惠金融的创业效应是影响收入不平等的重要渠道之一。进一步的中介效应分析表明,数字普惠金融的创业效应对收入不平等的影响存在异质性：数字普惠金融通过促进生存型创业从而改善了收入不平等,而数字普惠金融对机会型创业的促进却在一定程度上扩大了收入不平等。文章的研究结论对于理解数字普惠金融发展的正外部性以及如何缓解收入不平等提供了新的视角。     

Inward and outward FDI and income inequality: evidence from Europe

This paper examines the effects of inward and outward FDI on income inequality in Europe using panel cointegration techniques and unbalanced panel regressions. Our main result is that both inward FDI and outward FDI have, on average, a negative long-run effect on income inequality. This result is robust to employing alternative estimation methods, controlling for potential outliers, using different measures of FDI and inequality, and changing the period and sample selection. Other findings are: (i) while the long-run effect of inward and outward FDI on income inequality is clearly negative, their short-run effect appears to be positive. (ii) Long-run causality runs in both directions, suggesting that an increase in inward and outward FDI reduces income inequality in the long run, and that, in turn, a reduction in inequality leads to an increase in inward and outward FDI. (iii) There are large cross-country differences in the long-run effects of inward and outward FDI on income inequality; for some countries the long-run effects on income inequality are positive.     

Changes in services trade barriers in banking and their impact: the case of the ASEAN+3

Although there has been extensive research on the ASEAN+3 countries, which reveals a synchronisation of economic policies, including exchange rate management policies, research on the regional pattern of trade policies in the banking sector is limited. We evaluate the trade barriers in banking and their evolution, using data from three sequential surveys conducted by the World Bank and surveys by other international organisations. We find that the country dispersions in trade‐restricting policies are stable over time. Moreover, we find no evidence of moves in the direction of liberalisation in the sector. The economic modelling undertaken provides an indication of the real income gains and the cost increases of the policies adopted.     

Does Rising Income Inequality Reduce Life Expectancy? New Evidence for 26 European Countries (1995–2014)

An open debate these days is about how national income inequality could affect individuals’ health outcomes. Therefore, the present study aims to provide new evidence regarding life expectancy determinants and how they are related to the income inequality hypothesis. Precisely, it is provided new evidence on this relationship for 26 European countries during the period 1995–2014. The analysis is based on panel data techniques, with the latest data from both Eurostat and the OECD Health Statistics. Furthermore, data from the World Bank is also applied. Besides, we have tested the sensitivity of the estimates in our empirical analysis using three clusters of countries. Our results suggest that income inequality does not significantly reduce health in developed societies, like the European ones. Notwithstanding, as income inequality can be sometimes harmful for population health, these issues must be taken into account in order to improve health care policies.