Abstract
Patterns of income distribution can be influenced by financial sector development. Using provincial-level data, this paper empirically investigates the relationship between financial sector development and income inequality in Vietnam from 2002 to 2008. The results indicate that financial sector development has a positive impact on reducing income inequality; this is consistent with the bulk of theoretical and empirical research. The results also confirm that financial sector development and education have joint effects on reducing income inequality. We also find no evidence to support the Greenwood-Jovanovic hypothesis of an inverted U-shaped relationship between the development of the financial sector and income inequality.
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