"While substantial research finds that financial development boosts overall economic growth, we study whether financial development disproportionately raises the incomes of the poor and alleviates poverty. Using a broad cross-country sample, we distinguish among competing theoretical predictions about the impact of financial development on changes in income distribution and poverty alleviation. We find that financial development reduces income inequality by disproportionately boosting the incomes of the poor. Countries with better-developed financial intermediaries experience faster declines in measures of both poverty and income inequality. These results are robust to controlling for other country characteristics and potential reverse causality"--National Bureau of Economic Research web site.

Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

This article investigates how financial development helps to reduce poverty directly through the McKinnon conduit effect and indirectly through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.

Income inequality is rising. A quarter of a century ago, the average disposable income of the richest 10% in OECD countries was around seven times higher than that of the poorest 10%; today, it's around 9½ times higher. Why does this matter? Many fear this widening gap is hurting individuals, societies and even economies. This book explores income inequality across five main headings. It starts by explaining some key terms in the inequality debate. It then examines recent trends and explains why income inequality varies between countries. Next it looks at why income gaps are growing and, in particular, at the rise of the 1%. It then looks at the consequences, including research that suggests widening inequality could hurt economic growth. Finally, it examines policies for addressing inequality and making economies more inclusive.

This paper provides evidence on the link between financial development and income distribution. Several dimensions of financial development are considered: financial access, efficiency, stability, and liberalization. Each aspect is represented by two indicators: one related to financial institutions, and the other to financial markets. Using a sample of 143 countries from 1961 to 2011, the paper finds that four of the five dimensions of financial development can significantly reduce income inequality and poverty, except financial liberalization, which tends to exacerbate them. Also, banking sector development tends to provide a more significant impact on changing income distribution than stock market development. Together, these findings are consistent with the view that macroeconomic stability and reforms that strengthen creditor rights, contract enforcement, and financial institution regulation are needed to ensure that financial development and liberalization fully support the reduction of poverty and income equality.

This paper provides evidence on the link between financial development and income distribution. Several dimensions of financial development are considered: financial access, efficiency, stability, and liberalization. Each aspect is represented by two indicators: one related to financial institutions, and the other to financial markets. Using a sample of 143 countries from 1961 to 2011, the paper finds that four of the five dimensions of financial development can significantly reduce income inequality and poverty, except financial liberalization, which tends to exacerbate them. Also, banking sector development tends to provide a more significant impact on changing income distribution than stock market development. Together, these findings are consistent with the view that macroeconomic stability and reforms that strengthen creditor rights, contract enforcement, and financial institution regulation are needed to ensure that financial development and liberalization fully support the reduction of poverty and income equality.

This book explores country case studies and works that detail the exact transmission mechanisms through which financial development can enhance pro-poor development in order to derive best practices in this field. This is an important companion for professionals and policymakers, and also a vital reference source for students.