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The effect of financial development on income inequality in Africa: Looking for a needle in a haystack?
Jönköping University, Jönköping International Business School.
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper investigates the effect of financial development on income inequality in 20 African countries. Theory and a growing number of empirical studies suggest that the former exerts a negative impact on the latter by enabling low-income holders to undertake income-enhancing education and business investments, thereby promoting a tighter income distribution. However, using the share of GDP constituted by domestic credit to the private sector and broad money respectively as proxies for financial development, the results of this study fail to give significant evidence of this income-equalising effect. Given the heterogeneous nature of the economies studied here and the fact that data quality and quantity improve over time, it is believed that country-specific studies and future research can offer more conclusive results on how financial development influences income distribution in the African context. This would also provide a stronger foundation for policy recommendations in the continent’s plight to address the persistent high levels of income inequality.

Place, publisher, year, edition, pages
2014. , 28 p.
Keyword [en]
Financial development, income inequality, Africa, Greenwood-Jovanovic hypothesis, Gini coefficient
National Category
URN: urn:nbn:se:hj:diva-27141ISRN: JU-IHH-NAA-2-20150025OAI: diva2:820377
Subject / course
IHH, Economics
Available from: 2015-06-16 Created: 2015-06-12 Last updated: 2015-06-16Bibliographically approved

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