The effect of financial development on income inequality in Turkey: An estimate of the Greenwood-Jovanovic hypothesis

Artikel

This paper is the first to examine the linear and nonlinear effect of financial development on income inequality in Turkey over the period of 1980-2013. Financial development is represented by disaggregated and aggregated indicators. In this way, the effects of various financial indicators on income inequality are explained. Maki (2012) structural breaks co-integration test, and Stock and Watson (1993) dynamic ordinary least squares (DOLS) methods are followed for empirical analysis. Finally, the fully modified least squares (FM-OLS) regression analysis method developed by Philips and Hansen (1990) is used for robustness check. The estimation results of the linear relationship indicate that financial development is a mitigating effect on income inequality. These results support the inequality-narrowing hypothesis. The non-linear relationship results show that financial development first increases income inequality but after financial development reaches a certain level, this effect is reversed and financial development reduces income inequality. These results support the Greenwood-Jovanovic hypothesis. All the results strongly suggest that financial development is a mitigating or improving effect on income inequality over the long-run.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Review of Economic Perspectives ; ISSN: 1804-1663 ; Volume: 19 ; Year: 2019 ; Issue: 4 ; Pages: 319-344 ; Warsaw: De Gruyter

Classification and Topics

• Classification: Wirtschaft
• Subject: Financial development ; Income inequality ; Greenwood-Jovanovic hypothesis ; Turkey

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koçak, Emrah ; Uzay, Nısfet
• Event: Veröffentlichung
• (who): De Gruyter
• (where): Warsaw
• (when): 2019

Further information

• DOI: doi:10.2478/revecp-2019-0017
• Handle: http://hdl.handle.net/10419/227534
• Last update: 10.03.2025, 11:43 AM CET