TY  - JOUR
AU  - Demirguc-Kunt,Asli
AU  - Levine,Ross
TI  - Finance and Inequality: Theory and Evidence
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15275
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15275
L1  - http://www.nber.org/papers/w15275.pdf
N1  - Author contact info:
Asli Demirguc-Kunt
The World Bank
1818 H Street
Washington, DC  20433
E-Mail: ademirguckunt@worldbank.org

Ross Levine
Haas School of Business
University of California at Berkeley
545 Student Services Building, #1900 (F685)
Berkeley, CA 94720-1900
Tel: 510-643-1419
E-Mail: Ross_levine@haas.berkeley.edu
AB  - This paper critically reviews the literature on finance and inequality, highlighting substantive gaps in the literature. Finance plays a crucial role in most theories of persistent inequality. Unsurprisingly, therefore, economic theory provides a rich set of predictions concerning both the impact of finance on inequality and about the relevant mechanisms. Although subject to ample qualifications, the bulk of empirical research suggests that improvements in financial contracts, markets, and intermediaries expand economic opportunities and reduce inequality. Yet, there is a shortage of theoretical and empirical research on the potentially enormous impact of formal financial sector policies, such as bank regulations and securities law, on persistent inequality. Furthermore, there is no conceptual framework for considering the joint and endogenous evolution of finance, inequality, and economic growth.
ER  -