Financialization, household debt and income inequality: Empirical evidence

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The aftermath of the most recent financial crisis has prompted a surge of interest in the impact of finance capitalism on national economies and individual livelihoods. Yet, research on the impact of financialisation on income inequality, remains scant and inconclusive. Using data for 33 countries over 1996-2015, we provide evidence that of the three financialisation dimensions - of the financial, nonfinancial and household sectors - only household financialisation exerts a positive and robustly significant impact on income inequality. Re-estimations by system generalised-methods-of-moments (SYS-GMM) and difference-GMM as well as alternative income inequality measures, confirm the significant, positive impact of household indebtedness over all other financialisation dimensions. Following disaggregation of household financialisation into its three main components (mortgage, consumer and other purposes debt), we also uncover that it is increasing levels of household debt aimed at sustaining living standards that is accountable for the positive impact on income inequality, whilst mortgage debt reduces it.
Original languageEnglish
Article numberIJFE1886
Pages (from-to)(In-Press)
JournalInternational Journal of Finance and Economics
Early online date3 Aug 2020
Publication statusE-pub ahead of print - 3 Aug 2020


  • Financialisation
  • Income inequality
  • financial sector
  • Non-financial sector
  • Household debt

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