Financial Development and Income Inequality in Vietnam: An Empirical Analysis

Abstract:The pattern of income distribution can be influenced by financial evelopment. Using provincial data, this paper empirically investigates the relationship between financial development and income inequality in Vietnam from 2002 to 2008. The results show that financial development has a positive impact on reducing income inequality, which is consistent with the bulk of theoretical and empirical research. The results also confirms that financial development when it interacts with education has joint-effects on reducing income inequality. We also find no evidence supporting the Greenwood-Jovanovic hypothesis of an inverted U-shaped relationship between the financial sector of development and inequality.