Does Financial Development Affect Income Inequality in the U.S. States?

Authors

Manoel Bittencourt, University of Witwatersrand
Shinhye Chang, University of Pretoria
Rangan Gupta, University of Pretoria
Stephen M. Miller, University of Nevada, Las VegasFollow

Document Type

Article

Publication Date

9-5-2019

Publication Title

Journal of Policy Modeling

First page number:

1

Last page number:

14

Abstract

This paper examines the role of financial development on U.S. state-level income inequality in the 50 states from 1976 to 2011, using fixed-effect estimation. We find robust results whereby financial development linearly increases income inequality for the 50 states. When we divide 50 states into two separate groups of above-average and below-average inequality states than the cross-state average inequality, the effect of financial development on income inequality appears non-linear. When financial development improves, the effect increases at an increasing rate for above-average income-inequality states, whereas an inverted U-shaped relationship exists for below-average income-inequality states. To our knowledge, this paper is the first to examine the role of financial development on U.S. state-level inequality.

Keywords

Income inequality; Panel data; Personal income

Disciplines

Finance | Growth and Development | Income Distribution

Language

English

Repository Citation

Bittencourt, M., Chang, S., Gupta, R., Miller, S. M. (2019). Does Financial Development Affect Income Inequality in the U.S. States?. Journal of Policy Modeling 1-14.
http://dx.doi.org/10.1016/j.jpolmod.2019.07.008