Financial Development and Inequality in the Global Economy

von Ehrlich, Maximilian; Seidel, Tobias (February 2016). Financial Development and Inequality in the Global Economy (CRED Research Paper 8). Bern: CRED - Center for Regional Economic Development

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We build a heterogeneous-firms model with firm-specific wages and credit frictions to study the role of financial development for inequality in the global economy. If there are many small firms, better access to external funds reduces wage inequality and unemployment. In contrast, if there are many highproductive firms (those that export), financial development may have opposite effects - especially if trade costs
are low. In sum, the implications of financial development for inequality depend on the size distribution of firms and on the costs of exporting. Trade liberalization, however, raises inequality unambiguously.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Economic Policy and Regional Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Public Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)

UniBE Contributor:

v. Ehrlich, Maximilian

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

CRED Research Paper

Publisher:

CRED - Center for Regional Economic Development

Language:

English

Submitter:

Melanie Moser

Date Deposited:

28 Apr 2020 13:37

Last Modified:

28 Apr 2020 13:37

Uncontrolled Keywords:

financial development, credit constraints, international trade, inequality

JEL Classification:

F160, F650

BORIS DOI:

10.7892/boris.143542

URI:

https://boris.unibe.ch/id/eprint/143542

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