Banking Sector Crises and Inequality

Banking Sector Crises and Inequality

An apparent temporary narrowing of income inequality has been observed during several recent banking crises. But it would be a mistake to conclude that such crises don't matter for the poor. For one thing, the correlation is not strong, and the opposite pattern has also been present. Besides, the poor are much less able to absorb a cut in income: safety-net policies are crucial during a downturn even if the gap between rich and poor has temporarily narrowed. More fundamentally, distributional shifts during the crisis may be less important than the fact that underlying financial policy and infrastructures conducive to crisis can also be associated with more unequal societies.

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Bibliographic Details
Main Author: Honohan, Patrick
Language:English
Published: World Bank, Washington, DC 2005-07
Subjects:ABSOLUTE POVERTY, ADVERSE EFFECTS, BANK DEPOSITS, BANKING SECTOR, BANKING SYSTEM, BANKING SYSTEMS, BANKRUPTCY, BENCHMARK, CENTRAL BANK, CORRUPTION, COUNTRY DATA, COUNTRY DUMMIES, CRISES, CROSS-COUNTRY ANALYSIS, CROSS-COUNTRY DATA, CROSS-COUNTRY STUDY, CYCLICAL VOLATILITY, DATA SET, DEBT, DEPOSIT ACCOUNTS, DISTRIBUTIONAL CHANGES, DISTRIBUTIONAL EFFECTS, ECONOMIC CRISES, ECONOMIC DECLINE, ECONOMIC DOWNTURNS, ECONOMIC MECHANISMS, ECONOMIC SHOCKS, EMPIRICAL EVIDENCE, EMPIRICAL STUDIES, EQUILIBRIUM, EXOGENOUS SHOCKS, EXPENDITURES, EXPLANATORY VARIABLES, EXTERNAL IMBALANCES, EXTERNAL SHOCKS, EXTREME POVERTY, FINANCIAL ASSETS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEPTH, FINANCIAL INSTITUTIONS, FINANCIAL LIBERALIZATION, FINANCIAL SECTOR, FOREIGN EXCHANGE, GDP, GDP PER CAPITA, GINI COEFFICIENT, GLOBAL VIEW, GNP, GNP PER CAPITA, GROWTH DATA, GROWTH RATES, HOUSEHOLD DATA, HOUSEHOLD INCOME, HOUSEHOLD INCOMES, HOUSEHOLD SURVEYS, IMPLYING, INCOME, INCOME DISTRIBUTION, INCOME GROUPS, INCOME INEQUALITY, INCOME LEVEL, INCOME LEVELS, INCOME SHARE, INCREASED INEQUALITY, INEQUALITY, INEQUALITY ESTIMATES, INEQUALITY MEASURES, INFLATION, INFLATION RATE, INFLATION TAX, INSURANCE, INTEREST RATE, INTEREST RATES, INVOLUNTARY UNEMPLOYMENT, LABOR MARKET, LABOR MARKETS, LATIN AMERICAN, LEGAL ORIGIN, LENDING RATES, LIQUIDITY, LIVING STANDARDS, LONG-TERM GROWTH, LORENZ CURVE, MACROECONOMIC ADJUSTMENTS, MACROECONOMIC CONDITIONS, MEAN INCOME, MEAN VALUE, MEASURED INEQUALITY, MEASUREMENT ERROR, MEDIAN INCOME, NATIONAL INCOME, NOMINAL INTEREST RATE, OUTPUT GAP, POLICY IMPLICATIONS, POLICY RESEARCH, POLICY VARIABLES, POOR PEOPLE, POSITIVE, POSITIVE EFFECT, POVERTY GAP, POVERTY HEADCOUNT, POVERTY IMPACT, POVERTY INCIDENCE, POVERTY INCREASES, POVERTY MEASURES, PRICE CHANGES, PRICE STABILITY, PRODUCERS, PRODUCTION GOODS, PROPERTY RIGHTS, PUBLIC INFRASTRUCTURE, PUBLIC SPENDING, PURCHASING POWER, QUANTITATIVE APPROACH, RATIONAL EXPECTATIONS, REAL EXCHANGE RATE, REAL INCOME, REAL WAGE, REAL WAGE RATES, REAL WAGES, REGRESSION ANALYSIS, RELATIVE DEMAND, RELATIVE PRICES, SECURITIES, SKEWED DISTRIBUTION, SKILLED WORKERS, STOCK PRICES, TAX REVENUES, TAXATION, TELEPHONE LINES, TERMS OF TRADE, TRANSITION ECONOMIES, UNEMPLOYMENT, WAGE RATES, WEALTH, WEALTH DISTRIBUTION, WELFARE EFFECTS, WELFARE FUNCTION,
Online Access:http://documents.worldbank.org/curated/en/2005/07/6045536/banking-sector-crises-inequality
https://hdl.handle.net/10986/8201
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Summary:An apparent temporary narrowing of income inequality has been observed during several recent banking crises. But it would be a mistake to conclude that such crises don't matter for the poor. For one thing, the correlation is not strong, and the opposite pattern has also been present. Besides, the poor are much less able to absorb a cut in income: safety-net policies are crucial during a downturn even if the gap between rich and poor has temporarily narrowed. More fundamentally, distributional shifts during the crisis may be less important than the fact that underlying financial policy and infrastructures conducive to crisis can also be associated with more unequal societies.

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