Does Financial Development Contribute to Income Inequality in Latin America?
Latin America has experienced a trend of substantial reduction in inequality over last few decades. We investigate the effects of rapid development of financial sector on inequality in the region. In particular, we estimate a panel with country fixed effects based on a newly compiled dataset. We found that financial deepening has exacerbated income inequality on the continent. The results suggest that there is no Kuznetz curve in Latin America. Along with education and GDP level the inflation rate is associated with reduction in income gap.While exports are neutral, tax revenues and FDI aggravate inequality.
Keywords - Income Inequality, Financial Deepening, Poverty, Income Distribution, Financial Development, Latin America