Financialization, household debt and income inequality: Empirical evidence

Glauco De Vita; Yun Luo

doi:10.1002/ijfe.1886

Financialization, household debt and income inequality: Empirical evidence

Glauco De Vita, Yun Luo

University of Southampton

Research output: Contribution to journal › Article › peer-review

19 Citations (Scopus)

481 Downloads (Pure)

Abstract

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 language	English
Article number	IJFE1886
Pages (from-to)	1917-1937
Number of pages	21
Journal	International Journal of Finance and Economics
Volume	26
Issue number	2
Early online date	3 Aug 2020
DOIs	https://doi.org/10.1002/ijfe.1886
Publication status	Published - Apr 2021

Bibliographical note

This is the peer reviewed version of the following article: De Vita, G & Luo, Y 2021, 'Financialization, household debt and income inequality: Empirical evidence', International Journal of Finance and Economics, vol. 26, no. 2, IJFE1886, pp. 1917-1937, which has been published in final form at 10.1002/ijfe.1886 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.

Keywords

Financialisation
Income inequality
financial sector
Non-financial sector
Household debt

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1002/ijfe.1886

Post-PrintAccepted author manuscript, 1.51 MBLicence: Other

Cite this

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title = "Financialization, household debt and income inequality: Empirical evidence",

abstract = "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.",

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N2 - 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.

AB - 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.

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Financialization, household debt and income inequality: Empirical evidence

Abstract

Bibliographical note

Keywords

UN SDGs

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Glauco De Vita

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Financialization, household debt and income inequality: Empirical evidence

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

Other files and links

Fingerprint

Profiles

Glauco De Vita

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