Equity market liberalization, credit constraints and income inequality

Arbeitspapier

This paper provides compelling evidence that equity market liberalization, the most efficient way to smooth financial market frictions such as credit constraints, can alleviate persistent cross-dynastic income inequality through increasing the accumulation of human capital. We examine the impact of equity market liberalization on inequality by using the data of 72 countries during 1980-2006. The effect is robust to alternative measurements of equity market liberalization. Furthermore, equity market liberalization is associated with the different effects of credit constraints on the persistence of cross-dynastic income inequality. Finally, it is proved that foreign equity flows benefit the initially less active stock markets more than the active ones, which is important evidence that foreign equity flows act as a substitute for the domestic financial market. This finding emphasizes the importance of equity market liberalization for the poor, which helps to reduce inequality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Discussion Papers ; No. 2012-22

Classification and Topics

• Classification: Wirtschaft ; Financial Aspects of Economic Integration ; Open Economy Macroeconomics ; Macroeconomic Analyses of Economic Development ; Economic Development: Human Resources; Human Development; Income Distribution; Migration ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Subject: Income inequality ; equity market liberalization ; human capital ; economic growth

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sun, Puyang ; Sen, Somnath ; Jin, Shujing
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/57771
• Last update: 10.03.2025, 11:44 AM CET