JavaScript is disabled for your browser. Some features of this site may not work without it.
Please be advised that the site will be down for maintenance on Sunday, September 1, 2024, from 08:00 to 18:00, and again on Monday, September 2, 2024, from 08:00 to 09:00. We apologize for any inconvenience this may cause.
Financial development and inequality : Brazil 1985–1994
We examine the impact of financial development on earnings inequality in Brazil in the 1980s and first half of the 1990s. The evidence—based initially on time-series, and then on the relatively novel panel time-series data and analysis—shows that financial development had a significant and robust effect in reducing inequality during the period. We suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to financial markets can insulate themselves, via a process of financial adaptation, against recurrent poor macroeconomic performance, which is exemplified in Brazil by high rates of inflation. The main implication of the results is that a deeper and more active financial sector alleviates the high inequality seen in Brazil without the need for distortionary taxation.