Bank regulations and income inequality: Empirical evidence

Manthos D. Delis, Iftekhar Hasan and Pantelis Kazakis

No 18/2012, Bank of Finland Research Discussion Papers from Bank of Finland

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 (search for similar items in EconPapers)
JEL-codes: G28 O15 O16 (search for similar items in EconPapers)
Date: 2012
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Related works:
Journal Article: Bank Regulations and Income Inequality: Empirical Evidence (2014)
Working Paper: Bank regulations and income inequality: Empirical evidence (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2012_018

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