A new approach to financial integration and market income inequality |
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| Institution: | 1. Centre for Financial Risk Macquarie University, Sydney, Australia;2. Southwestern University of Finance and Economics, China;3. Queensland Productivity Commission, Brisbane, Australia;1. Paris Sorbonne University, Abu Dhabi, United Arab Emirates;2. EconomiX-CNRS, Université Paris Ouest Nanterre — La Défense, 200 avenue de la République, 92001 Nanterre Cedex, France;1. Department of Economics and Regional Development, Panteion, Greece;2. DG Research, European Central Bank and University of Surrey, UK |
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| Abstract: | Using loan contracts of firms in the syndicated loan market, we generate weighted aggregate measures of financial connections of emerging market economies and relate these financial integration indices to income inequality. The results reveal that financial integration is beneficial in reducing market income inequality, but worsens net income inequality. Financial intermediation is detrimental to net income inequality, but beneficial in lowering market income inequality. The results show that independent access to financing has no relationship with income inequality. The results are invariant using alternative income inequality indices and using external instrument against internal instrument in identifying the equations. |
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