Symmetric and asymmetric effects of financial deepening on income inequality in South Africa

The aim of this study is to examine the financial development-inequality nexus in South Africa from 1980 to 2017, specifically if financial deepening reduces income inequality. The initial results indicate a positive association between financial deepening and income inequality. On further explorati...

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Bibliographic Details
Published in:Development southern Africa (Sandton, South Africa) South Africa), 2023-09, Vol.40 (5), p.961-978
Main Authors: Biyase, Mduduzi, Chisadza, Carolyn
Format: Article
Language:English
Subjects:
ARDL
Economic development
Financial deepening
Income inequality
Policy making
South Africa
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Summary:The aim of this study is to examine the financial development-inequality nexus in South Africa from 1980 to 2017, specifically if financial deepening reduces income inequality. The initial results indicate a positive association between financial deepening and income inequality. On further exploration, we find evidence that the Greenwood and Jovanovich hypothesis holds for South Africa. We observe an inverted non-linear relationship between financial deepening and income inequality in the long-run. The results suggest that at early stages of financial development, income inequality increases, but gradually starts to decrease as the financial sector becomes more established in the long-run. The findings highlight the need for policymakers to focus on inclusive financial sector reforms in the early stages of financial development.
ISSN:0376-835X
1470-3637
DOI:10.1080/0376835X.2022.2163226