Levine, RossDemirgüç-Kunt, Asli2012-03-192012-03-192009-06-01https://hdl.handle.net/10986/4161This paper critically reviews the literature on finance and inequality, highlighting substantive gaps in the literature. Finance plays a crucial role in most theories of persistent inequality. Unsurprisingly, therefore, economic theory provides a rich set of predictions concerning both the impact of finance on inequality and about the relevant mechanisms. Although subject to ample qualifications, the bulk of empirical research suggests that improvements in financial contracts, markets, and intermediaries expand economic opportunities and reduce inequality. Yet, there is a shortage of theoretical and empirical research on the potentially enormous impact of formal financial sector policies, such as bank regulations and securities law, on persistent inequality. Furthermore, there is no conceptual framework for considering the joint and endogenous evolution of finance, inequality, and economic growth.CC BY 3.0 IGOACCESS TO CREDITACCESS TO EXTERNAL FINANCEACCESS TO FINANCEACCESS TO FINANCIAL SERVICESADVERSE SELECTIONANNUAL EARNINGSBANK BRANCHESBANK COMPETITIONBANKING SERVICESBANKING SYSTEMBANKING SYSTEMSBANKSBEQUESTBIASESBLACK WORKERSBORROWERBORROWINGBUSINESS ACUMENBUSINESS OPPORTUNITIESCAPITAL ACCUMULATIONCAPITAL INVESTMENTCAPITAL INVESTMENTSCAPITAL MARKETSCASH FLOWCOLLATERALCOMMERCIAL BANKCOMMERCIAL BANKSCONSUMERSCONTRIBUTIONSCREDIT CONSTRAINTSCREDIT MARKETCREDIT MARKETSCREDIT PROGRAMCREDIT PROGRAMSCREDIT RATIONINGCREDIT-SCORINGDEBTSDEPOSITDEREGULATIONDIMINISHING RETURNSDIRECT CREDITDIRECTED CREDITDISCRIMINATIONDISTRIBUTION OF WEALTHDIVERSIFICATIONDURABLE GOODSEARNINGSECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC EFFICIENCYECONOMIC GROWTHECONOMIC OPPORTUNITIESECONOMIC OPPORTUNITYECONOMIC OUTCOMESECONOMIC PERFORMANCEECONOMIC THEORYECONOMIES OF SCALEELIGIBILITY CRITERIONEMPLOYEREMPLOYERSENDOWMENTSENROLLMENTENTREPRENEURENTREPRENEURIAL ABILITYENTREPRENEURIAL ACTIVITIESENTREPRENEURIAL ACTIVITYENTREPRENEURIAL BEHAVIORENTREPRENEURIAL EFFORTENTREPRENEURIAL OPPORTUNITIESENTREPRENEURSENTRY BARRIERSEQUALITY OF OPPORTUNITYEQUILIBRIUMEXPECTED RETURNEXPENDITURESEXTERNAL FINANCEEXTERNALITIESEXTERNALITYFAMILIESFAMILY INCOMEFINANCE EDUCATIONFINANCIAL ARRANGEMENTSFINANCIAL CONSTRAINTFINANCIAL CONSTRAINTSFINANCIAL DEPTHFINANCIAL DEVELOPMENTFINANCIAL DEVELOPMENTSFINANCIAL GLOBALIZATIONFINANCIAL INNOVATIONFINANCIAL INNOVATIONSFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIARYFINANCIAL INTERMEDIATIONFINANCIAL LIBERALIZATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL REGULATIONSFINANCIAL SECTOR POLICIESFINANCIAL SECTOR REFORMSFINANCIAL SERVICESFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIAL TRANSACTIONSFINANCING NEEDSFIXED COSTFIXED COSTSFORMAL FINANCIAL SECTORFUTURE RESEARCHGDPGDP PER CAPITAGINI COEFFICIENTGREATER ACCESSGROWTH OPPORTUNITIESGROWTH RATEHOUSEHOLD ACCESSHOUSEHOLD EXPENDITURESHOUSEHOLD WELFAREHOUSEHOLDSHUMAN CAPITALIMPERFECT CREDITINCOME LEVELINCOME LEVELSINCOMESINCREASE IN INCOMEINEFFICIENCYINEQUALITIESINEQUALITYINHERITANCEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL FINANCEINVESTMENT OPPORTUNITIESINVESTMENT RETURNSLABOR MARKETLABOR MARKETSLACK OF ACCESSLANDLESS HOUSEHOLDSLENDERLENDERSLEVEL OF ASSETSLIABILITYLIMITED ACCESSLIMITED ACCESS TO FINANCELIQUIDITYLOANLOAN DECISIONLOCAL BANKSLORENZ CURVELOW INCOMELOW-INCOMELOW-INCOME INDIVIDUALSLOWER-INCOME FAMILIESLOWER-INCOME WORKERSMARGINAL COSTMARGINAL PROPENSITY TO SAVEMARKET CONDITIONSMARKET CONSTRAINTSMICRO-CREDITMICRO-ENTERPRISESMICRO-ENTREPRENEURSMICROCREDITMICROECONOMIC ANALYSESMICROFINANCEMICROFINANCE INSTITUTIONMICROFINANCE INSTITUTIONSMICROFINANCE LOANSMONOPOLYMORAL HAZARDNEW BUSINESSESNEW ENTREPRENEURSOVERHEAD COSTSPER CAPITA INCOMEPHYSICAL ASSETSPHYSICAL CAPITALPOLITICAL ECONOMYPOOR BORROWERSPROBABILITYPRODUCT MARKETSPRODUCTIVITY INCREASESPROFITABILITYPROPERTY RIGHTSPUBLIC EDUCATIONPUBLIC GOODSRATE OF RETURNRATES OF RETURNRECEIPTRENTSREPAYMENTRESERVE BANKRESOURCE ALLOCATIONRURAL BRANCHESSALESSAVERSSAVING BEHAVIORSAVINGSSAVINGS BEHAVIORSAVINGS RATESAVINGS RATESSECURITIESSELF-EMPLOYMENTSKILLED WORKERSSMALL BUSINESSSMALL BUSINESSESSMALL ENTERPRISESSTART-UPTAX BURDENTAX RATETAX RATESTAX REVENUESTOTAL OUTPUTTRANSACTIONTRANSACTION COSTSTRANSACTIONS COSTSTRANSITION ECONOMIESVALUABLEVILLAGEVILLAGESWAGEWAGE RATESWAGESWEALTHWorld Bank10.1596/1813-9450-4967