Financial Development, Corporations, and Inequality

Richard Sylla

Modern financial systems, of which corporations are a key component, have increased inequalities of incomes and wealth across nations for several centuries. This has been called “the great divergence,” and some quantitative dimensions of it are set forth here.  Financial systems also tend to increase inequalities within nations; the U.S. is an example discussed here. Inequality does not result from finance per se, but rather from differential access to its benefits. Increasing nations’ and households’ access to finance can reduce inequalities, but that will require more financial education and financial literacy, which at present appear to be woefully inadequate.

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