Financial development and income inequality: An empirical analysis on the emerging market economies

In developing countries, achieving high economic growth rates with fair income distribution is one of the economic targets in these countries. The effect of financial development on income inequality is examined and discussed in the literature with many empirical practices in line with these objectives. The purpose of the study is to test the relationship between income inequality and financial development. Cross-sectional dependence, homogeneity, panel co-integration and panel cointegration estimators were used in the study. The findings of the study confirm that financial development has no significant effect on income inequality for the panel group. However, Brazil, Russia, Greece and Turkey to the conclusion that financial development reduces income inequality has been reached. It is concluded that financial development increases income inequality in Bulgaria, Colombia, Croatia, Hungary, Malaysia, Poland and Romania. Considering the role of financial development in terms of national economies, improving income distribution will make financial development more significantly as a driving force of economic growth.