Paper
Financial Development and Inequality: Brazil 1985-99
What was the impact of financial development on earnings inequality in Brazil?
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This paper examines the impact of financial development on earnings inequality in Brazil in the 1980s and 90s.The paper finds that:
- The progressive effect of the financial development measures more than compensated for the regressive effects of inflation on inequality;
- All measures of financial development helped to increase the poors share in income distribution;
- Financial development, through investment in productive activities channel, is important under stable or unstable macroeconomic conditions.
The paper concludes that:
- Access to credit markets, particularly by the poor, has a positive impact in reducing inequality;
- Access to financial markets provides insulation against the poor macroeconomic performance;
- Policy of making financial and credit markets more widely available has the advantage of being a non-distortionary fiscal policy that reduces the persistent inequality present in Brazil.
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