Abstract
Sustainable finance seeks to increase the contribution of finance to sustainable and inclusive growth. The global financial crisis of 2008 provoked the return of inequality in advanced countries to levels typical of a century ago. The aim of this paper is to empirically analyze the relationship between finance and income inequality for a group of nine OECD countries over the pre-crisis and post-crisis periods (2000–2015). The model proposed in this study simultaneously considers two explanatory variables for measuring financial depth (credit provision and capital markets) and a new multidimensional variable to measure the financial system’s resilience (a composite indicator), and conducts panel data analysis. The empirical results confirm that in terms of financial depth, the "too much finance hypothesis" holds. We also find that financial system’s resilience helps alleviate existing income inequality and that income inequality appears higher in liberal market economies than in coordinated economies. These results encourage policymakers to look beyond traditional public redistribution interventions and to pay attention to other financial variables related to the financialization process, the behavior of financial intermediaries, and the specific environment in which they operate.
Highlights
Sustainable finance seeks to increase the contribution of finance to sustainable growth
The model proposed in this study simultaneously considers two explanatory variables for measuring financial depth and a new multidimensional variable to measure the financial system’s resilience, and conducts panel data analysis
We find a high correlation between credit provision and stock market capitalization but low correlations between the financial resilience index and the rest of the independent and control variables
Summary
Sustainable finance seeks to increase the contribution of finance to sustainable growth. The financial inclusion induced by banks contributes positively to financial stability and to reduce income inequality [1]. Little attention has been paid to the analysis of whether the economic growth generated is sustainable or inclusive. Since the pioneering studies of Blank and Blinder [2] and Cutler and Katz [3], there has been an academic consensus that recession leads to increases in inequality. The scant empirical evidence available seems to show that the negative impact of economic recessions on the situation of low-income households is considerably higher than the positive impact of the expansive phases of the economy [4]
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
