A new approach to financial integration and market income inequality

Using loan contracts of firms in the syndicated loan market, we generate weighted aggregate measures of financial connections of emerging market economies and relate these financial integration indices to income inequality. The results reveal that financial integration is beneficial in reducing mark...

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Bibliographic Details
Published in:Emerging markets review 2018-12, Vol.37, p.134-147
Main Authors: Inekwe, John Nkwoma, Jin, Yi, Valenzuela, Maria Rebecca
Format: Article
Language:English
Subjects:
D31
F21
F36
Financial integration
G15
Income inequality
Institutions
JEL
Networks
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Summary:Using loan contracts of firms in the syndicated loan market, we generate weighted aggregate measures of financial connections of emerging market economies and relate these financial integration indices to income inequality. The results reveal that financial integration is beneficial in reducing market income inequality, but worsens net income inequality. Financial intermediation is detrimental to net income inequality, but beneficial in lowering market income inequality. The results show that independent access to financing has no relationship with income inequality. The results are invariant using alternative income inequality indices and using external instrument against internal instrument in identifying the equations. •We compute financial connections of emerging market economies•Financial integration reduces market income inequality•Financial intermediation is detrimental to net income inequality•Independent access to financing has no relationship with income inequality
ISSN:1566-0141
1873-6173
DOI:10.1016/j.ememar.2018.07.002