Does more finance mean more inequality in times of crisis?
Clement Mathonnat  1@  , Benjamin Williams  2@  
1 : Centre for Studies and Research on International Development  (CERDI)  -  Site web
Université Clermont Auvergne, CNRS
65 Boulevard F. Mitterrand Boite Postale 320 63009 Clermont-Ferrand CEDEX 1 -  France
2 : Clermont-Ferrand Research Center in Management  (CRCGM)  -  Site web
Université Clermont Auvergne, Université Clermont Auvergne
11 Boulevard Charles de Gaulle 63000 Clermont-Ferrand -  France

Whole arrays of recent empirical studies show that both banking crises and the increase in the size of the financial sector play a central and important role in the evolution of income inequalities over the last decades. To our knowledge, no study has so far sought to link these three elements with the aim to investigate the role of the size of the banking sector in the amplification of income inequalities after the outbreak of banking crises. This paper seeks to address this issue based on a sample of 69 banking crises in 54 countries over the 1977-2013 period. Our analysis reveals that the size of the banking sector significantly increases income inequalities after banking crises. This result is robust to a broad range of alternative specifications and is unaffected by various potential sources of endogeneity. Finally, we bring the empirical evidence that the effect of the size of the banking sector on the redistributive effect of banking crises appears to be linear and to be stronger for developing countries.

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