The Relationship of Financial Development and Income Inequality: Panel Causality Approach

Abstract

This study examines the causal relationship between financial development and income inequality for developed and developing countries. For this purpose, the relationship between these two variables is revealed by using data of 22 developed and developing countries from 1993 to 2016 and Kónya (2006) panel causality test. Unlike previous studies using traditional panel regression methods, the method of this study allows to obtain country-specific findings. Econometric analyzes are carried out with both the primary financial development index and the eight sub-indexes of financial development. The findings reveal that the relationship between financial development and income inequality is mostly driven by financial development. Moreover, it is concluded that the existence of causality relationship from financial development to income inequality is more common in developing countries than in developed countries. While the development of financial markets in developed countries has a more significant relationship with income inequality than the development of financial institutions, such a difference is not observed in developing countries. Finally, this study clearly shows that the relationship between financial development and income inequality may differ due to country-specific characteristics.

Keywords

• Financial Development
• Income Inequality
• Panel Causality
• Develop and Developing Countries

Finansal Gelişme ve Gelir Eşitsizliği İlişkisi: Panel Nedensellik Yaklaşımı

Abstract

Bu çalışma finansal gelişme ile gelir eşitsizliği arasındaki nedensellik ilişkisini gelişmiş ve gelişmekte olan ülkeler için incelemektedir. Bu amaçla bu iki değişken arasındaki ilişki, seçilmiş 22 gelişmiş ve gelişmekte olan ülkenin 1993-2016 dönemini kapsayan veriler ile Kónya (2006) panel nedensellik testi kullanılarak ortaya çıkarılmaya çalışılmaktadır. Geleneksel panel regresyon yöntemlerini kullanan önceki çalışmaların aksine bu çalışmanın yöntemi ülkelere özgü bulguların elde edilmesine imkân vermektedir. Ekonometrik analizler, finansal gelişmeyi temsil etmek amacıyla hem temel finansal gelişme endeksi hem de bu endeksi oluşturan sekiz alt endeks ile yapılmaktadır. Elde edilen bulgular finansal gelişme ve gelir eşitsizliği ilişkisinin büyük oranda finansal gelişme tarafından yönlendirildiğini ortaya koymaktadır. Dahası finansal gelişmeden gelir eşitsizliğine doğru nedensellik ilişkisinin varlığının gelişmekte olan ülkelerde gelişmiş ülkelere göre daha yaygın olduğunu sonucuna varılmaktadır. Gelişmiş ülkelerde finansal piyasaların gelişimi, finansal kurumların gelişimine göre gelir eşitsizliği ile daha fazla anlamlı ilişkiye sahipken gelişmekte olan ülkelerde böylesi bir farklılık gözlemlenmemektedir. Son olarak bu çalışma finansal gelişme ve gelir eşitsizliği ilişkisinin ülkelerin kendine özgü özelliklerden dolayı farklılaşabileceğini açık bir biçimde göstermektedir.

Keywords

• Finansal Gelişme
• Gelir Eşitsizliği
• Panel Nedensellik
• Gelişmiş ve Gelişmekte Olan Ülkeler

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