Financial Development And Inequality: Brazil 1985-1994
Source: University of Cape Town
The authors examine the impact of financial development on earnings in-equality in Brazil in the 1980s and first half of the 1990s. The evidence -based on panel time-series data and analysis-shows that financial development had a significant and robust effect in reducing inequality during the period. They suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to financial markets can insulate themselves, via a process of financial adaptation, against recur-rent poor macroeconomic performance, which is exemplified in Brazil by high rates of inflation.