The Influence of Financial Development on Wealth Inequality in Capitalism: Fresh Evidence from Emerging Countries

Abstract

Abstract Our paper investigates the impact of financial development on wealth inequality for the ten emerging countries, Brazil, China, India, Indonesia, Malaysia, Mexico, Philippines, South Africa, Thailand, and Turkey, from 1995 to 2020 by observing the effect of economic growth and trade openness. By applying the augmented mean group (AMG) estimator, the empirical findings reveal that financial development causes increasing wealth inequality for panel groups. Also, this increasing effect has been observed in Brazil, China, Mexico, and the Philippines. Moreover, economic growth and trade openness positively impact wealth inequality for panel samples. Dumitrescu and Hurlin’s (2012) causality test results indicate a two-way causality relationship among financial development and wealth inequality, economic growth and wealth inequality, wealth inequality and trade openness. Our paper highlights the major policy implementation that the government intervention plays a vital role in facilitating equal access to financial assets for lower-income people.