A closer look at financial development and income distribution

Working paper GATE 2011-04International audienceThis paper analyzes the under-investigated relationship uniting financial development and income distribution. We use a novel approach taking into account for the first time the specific channels linking banks, capital markets and income inequality, the time-varying nature of the relationship, and reciprocal causality. We construct a set of annual indicators of banking and capital market size, robustness, efficiency and international integration. We then estimate the determinants of income distribution using a panel Bayesian structural vector autoregressive (SVAR) model, for a set of 49 countries over the 1994-2002 period. We uncover a significant causality running from financial sector development to income distribution. In addition, the banking sector seems to exert a stronger impact on inequality. Finally, the relationship appears to depend on characteristics of the financial sector, rather than on its size

Achieving Amicable Settlements and Possible Reconciliations : The Role of Forensic Accountants in Equitable Distributions

This book is focussed on investigating how a proper implementation of forensic accounting tools could serve as a means and channel whereby such techniques as valuations, equitable distribution and evidence could be employed in avoiding unnecessary break ups and emotional breakdowns. Through the exploration of options which are available to marital couples considering separation or divorce during periods of crises, the book aims to emphasise the theme that a break from the relationship may be the step required to avert a break-up. The role of forensic accounting in facilitating an amicable process during such a break - which could result in the possible restoration of relationships involved during such crucial stage also constitutes a recurring theme of the book. It is a well known fact that financial problems constitute the source of break-downs in many relationships. Whilst other factors may contribute to failures in relationships and whilst some couples may have finalised their intentions and require very little assistance in getting through such painstaking processes, others may have their decisions influenced by court procedures, counselling sessions and the proper application of equitable distribution procedures – such equitable distribution procedure being considered a preferred technique in resolving marital asset distributions than the community property concept. Further this book highlights factors which need to be taken into consideration – not only in averting unnecessary break-ups, but also in facilitating harmonious and amicable settlements which may eventually pave the way for reconciliation, as well as restoration of broken down relationships. Whilst planning of marital asset distribution should not constitute the focus of any marriage, planning when the need arises may serve not only as a channel whereby a relationship can be restored eventually, but as a temporary means of weathering the storms during the difficult times in the relationship

Predatory Profiling: The Role of Race and Ethnicity in the Location of Payday Lenders in California

In California and elsewhere, African Americans and Latinos make up a disproportionate share of payday loan borrowers. CRL's analysis reveals that the racial and ethnic composition of a neighborhood is the primary predictor of payday lending locations, while playing a very minimal role in explaining the variation in the location of bank branches. As a result, payday lending storefronts are most heavily concentrated in African American and Latino communities. By contrast, the location of mainstream financial service providers such as banks can be largely explained by supply and demand factors such as the presenceof retail space

Distributional National Accounts (DINA) for Austria, 2004-2016

This paper constructs distributional national accounts for Austria for the period 2004-2016. We enrich survey data with tabulated tax data and make it fully consistent with national accounts data. The comprehensive dataset allows us to analyse the distribution of macroeconomic growth across the income distribution and to explore the evolution of income inequality in pre-tax income over time. Our results suggest that the distribution of growth has changed over time, which had considerable repercussions on inequality. Inequality started to decline at the very beginning of the economic and financial crisis in 2007, however it has increased again after 2012. We further provide novel insights into the evolution of capital income for top income groups and explore redistribution mechanisms that operated in Austria. Government spending was found to play a key role for redistributive effects across the income distribution. In particular, the transfer system redistributes pre-tax income to a large extent.Series: INEQ Working Paper Serie

When countries do not do what they say: Systematic discrepancies between exchange rate regime announcements and de facto policies

We study the apparent disconnect between what countries announce to be their exchange rate regime and what they de facto implement. Even though discrepancies between announcements and de facto polices are frequent, there is a lack of understanding of actual patterns and underlying reasons. We contribute to the literature by identifying a number of robust stylized facts by means of an in-depth analysis of a large cross-country dataset. A key insight is that countries that operate under intermediate de facto regimes tend to announce fixed or flexible exchange rate regimes. The exact nature of deviations is related to country characteristics such as trade structure, financial development, and financial openness. Furthermore, regime discrepancies have followed secular trends, which are most likely related to financial globalization and changes in monetary policy design

Financial Development and the Composition of Industrial Growth

We re-examine the role of financial market development in the intersectoral allocation of resources. Specifically, we propose the use of a new methodology that looks at the co-movement in growth rates across pairs of countries to examine the role of financial development in allowing firms to take advantage of growth opportunities. Our model begins with the assumption that there exist common global shocks to growth opportunities, and we hypothesize that countries should therefore have correlated patterns of growth if they are able to take advantage of these shocks. We find that countries have more highly correlated growth rates across sectors when both countries have well-developed financial markets; this is consistent with financial markets playing an important role in allowing firms to take advantage of global growth opportunities. We further observe that growth opportunities will be more similar for countries that are at similar levels of economic development. This allows for a further refinement of our initial test: the impact of financial development on country-pair co-movement is much stronger between country pairs at similar levels of economic development. Finally, we note that our results imply that private banking appears to play a particularly important role in resource allocation, as our results are particularly strong when financial development takes into account both the level and composition of financial market institutions.

FECES STANDARD MONEY: BEYOND TRANSACTIONS

Department of Urban and Environmental Engineering (Convergence of Science and Arts)Feces Standard Money (fSM), is a complementary currency that is different from other currencies in a number of ways. It is the first currency to adopt feces as its standard. In a world where objects and people are thought of as "goods and services," reality is compressed into conceptions of "use value" or "utility???. However, in the fSM system, feces and food waste that have traditionally and culturally been classified as ???human waste??? are used to produce biogas, creating value. Feces then becomes a representation of a new conception of value - one based on abundance instead of scarcity. This study aims to explore how the use of fSM can facilitate a redefinition of sustainable wealth. It begins by exploring neoclassical and modern theories of money and their relationship to the current state of money. It argues that economics??? failure to adequately account for the role of money as a basis of social relations contributes to the current unsustainable economic system. Building on the background and philosophical underpinnings of fSM, it postulates that money based on a feces standard might be a possible solution to developing a monetary system that can serve as the basis of social relations and facilitation of exchange as a means of instigating social change in attitudes towards global challenges like inequality and climate change. Social network analysis is used to investigate the social footprint of fSM in a game simulation of the fSM system. It is found that the mechanisms of fSM has the potential to imbue the network with tight knit connections -knots- that can contribute to a more inclusive monetary system.clos

European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries

The European Union made a number of steps not least of them the introduction of a common currency to foster the integration of the European financial markets. A number of papers have tried to gauge the degree of integration for various financial markets looking at the convergence of interest rates. A common finding is that government bond markets are quite well integrated. In this paper stochastic Kernel density estimates are used to take a closer look at the dynamics that drive the process of interest rate convergence. The main finding is that countries with large initial deviations from the mean interest rate do indeed converge. Interestingly the candidates least suspected namely the countries initially with interest rates at the mean level show a pattern of slight divergence.Financial markets integration, euro area government bonds, stochastic Kernel density estimates

European Financial Market Integration: A Closer Look at Government Bonds in Eurozone Countries

The European Union made a number of steps not least of them the introduction of a common currency to foster the integration of the European financial markets. A number of papers have tried to gauge the degree of integration for various financial markets looking at the convergence of interest rates. A common finding is that government bond markets are quite well integrated. In this paper stochastic Kernel density estimates are used to take a closer look at the dynamics that drive the process of interest rate convergence. The main finding is that countries with large initial deviations from the mean interest rate do indeed converge. Interestingly the candidates least suspected namely the countries initially with interest rates at the mean level show a pattern of slight divergence.Financial markets integration, euro area government bonds, stochastic Kernel-density estimates

A TALE OF TWO “GLOBALIZATIONS”: CAPITAL FLOWS FROM RICH TO POOR IN TWO ERAS OF GLOBAL FINANCE

In this paper we take a comparative look at capital flows to less- developed countries in two eras of financial globalization. The paper extends recent research on the developmental effects of international financial integration, long-term trends in capital mobility and “globalization in historical perspective”. Analyzing the patterns of international financial integration in the three decades of the classical gold standard and after 1990 we show that investment in developing countries was a central element of 19th century financial globalization, but plays only a minor role today. The Lucas paradox of capital failing to flow from rich to poor has grown much stronger. In historical perspective, today’s financial globalization is marked by massive diversification flows between high-income economies and a relative marginalization of less-developed economies.globalization, capital flows, development finance, capital market integration, economic history