Relationship Between Income Inequality And Financial...

Financial development boosts economic growth have been shown by the increasing number of scholars, however whether the financial sector development could benefits the income distribution is still controversial. Under this question, this essay try to use statistically method to explore the relationship between income inequality and financial sector development. This essay’s results present that inequality decreases as financial development. Although there are some weak evidence suggests that there is an inverted U shaped linkage between income distribution and financial development. 2.A review of theoretical discussion 2.1 Earlier analysis Schumpeter (1934) points that finance have many functions which are significant in economic growth and other areas development, for example, risk management, project evaluation, saving increase. The connection between the operation of the financial sector and economic growth has been one of the most heavily researched topics in development economics. There are convincing arguments that financial sector development plays a pivotal role in facilitating economic growth. In the period of mercantilism, mercantilists think that currency is the treasure, therefore the increase of currency is equal to the economic growth. In 1912 joseph alois schumpeter, a highly acclaimed economist, published a book entitled the theory of economic development that assessed that the impact of financial variables, for instance currency, interests, credit and loan,Show MoreRelatedThe Impact Of Financial Development On Society s Inequality Gap931 Words   |  4 PagesNardi (2006) argue that financial developme nt is beneficial to the individuals who have higher ability to make investment and then become the entrepreneurs. In contrast, the individuals who are relatively more common could not make human investment and then become the workers. Therefore, the whole society’s inequality gap will be widen. 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