Research Discussion Papers, Bank of Finland
Manthos D. Delis
Bank regulations and income inequality: Empirical evidence
(), Iftekhar Hasan
() and Pantelis Kazakis
Abstract: This paper provides cross-country evidence that variations
in bank regulatory policies result in differences in income distribution.
In particular, the overall liberalization of banking systems decreases the
Gini coefficient and the Theil index significantly. However, this effect
fades away for countries with low levels of economic and institutional
development and for market-based economies. Among the different
liberalization policies, the most significant negative effect on inequality
is that of credit controls, which also seem to have a lasting effect on the
Gini coefficient. Banking supervision and the abolition of interest rate
controls also have a negative yet short-run impact on income inequality. A
notable finding is that liberalization of securities markets increases
income inequality substantially and over a long time span, suggesting that
securitization widens the distribution of income. We contend that these
findings have new implications for the effects of bank regulations, besides
those related to their impact on financial stability.
Keywords: bank regulations; income inequality; cross-country panel data; instrumental variables; panel VAR; (follow links to similar papers)
JEL-Codes: G28; O15; O16; (follow links to similar papers)
45 pages, April 20, 2012
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