Financial Development and Inequality: Brazil 1985-99

Manoel Bittencourt

No 5, Proceedings of the German Development Economics Conference, Berlin 2006 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: We examine the impact that financial development had on earnings inequality in Brazil in the 1980's and 90's. The empirical evidence, based on panel time series and time series data, shows that more broad access to financial and credit markets had a significant and robust effect in reducing inequality during the period investigated. We suggest that this is not only because the poor can invest the acquired credit in all sorts of productive activities, but also because those with access to financial markets can insulate themselves against recurrent poor macroeconomic performance, which is exemplified by extreme inflation rates. The main implication of the results is that a seemingly non-distortionary policy, such as more credit aimed at the poor, alleviates the high inequality present in Brazil and consequently improves welfare without distorting economic efficiency.

Keywords: Financial development and markets; credit; inequality and welfare; inflation (search for similar items in EconPapers)
JEL-codes: D31 E44 O11 O54 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-dev, nep-fmk, nep-lam, nep-mac and nep-mfd
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Financial Development and Inequality: Brazil 1985-99 (2006)
Working Paper: Financial Development and Inequality: Brazil 1985-99 (2006)
Working Paper: Financial Development and Inequality: Brazil 1985-99 (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:gdec06:4728

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