Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57771
Authors: 
Sun, Puyang
Sen, Somnath
Jin, Shujing
Year of Publication: 
2012
Series/Report no.: 
Economics Discussion Papers 2012-22
Abstract: 
This paper provides compelling evidence that equity market liberalization, the most efficient way to smooth financial market frictions such as credit constraints, can alleviate persistent cross-dynastic income inequality through increasing the accumulation of human capital. We examine the impact of equity market liberalization on inequality by using the data of 72 countries during 1980-2006. The effect is robust to alternative measurements of equity market liberalization. Furthermore, equity market liberalization is associated with the different effects of credit constraints on the persistence of cross-dynastic income inequality. Finally, it is proved that foreign equity flows benefit the initially less active stock markets more than the active ones, which is important evidence that foreign equity flows act as a substitute for the domestic financial market. This finding emphasizes the importance of equity market liberalization for the poor, which helps to reduce inequality.
Subjects: 
Income inequality
equity market liberalization
human capital
economic growth
JEL: 
F36
F41
G0
O11
O15
O16
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/2.0/de/deed.en
Document Type: 
Working Paper

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