The effect of financial deepening on inequality: Some international evidence

► This paper uses an unbalanced panel data analysis of 126 countries for the period 1963-2002 to analyze the effects of financial deepening on inequality. ► Empirical results indicate that financial deepening reduces inequality, but economic growth reduces the equalizing effects of financial deepening. ► Empirical results also show that inequality increases with an increase in trade openness, while the disequalizing effects of trade openness decrease as a country grows. ► Financial deepening and trade openness, therefore, have asymmetric effects on inequality. ► These effects are robust to the choice of financial variables, inequality measures, and model specifications.