A research framework From Financial development and common prosperity
The following is the A research framework From Financial development and common prosperity recommended by recordtrend.com. And this article belongs to the classification: research report.
Since the 2008 international financial crisis, there have been many criticisms of Finance in the world. “Occupy Wall Street movement” regards the expansion of the financial industry as the culprit of the gap between the rich and the poor; Piketty’s capital in the 21st century uses a large number of empirical data to show that “capital is back” (piketty, 2015); In recent years, financial technology has produced polarization effect while serving economic and social development and innovating the mode of wealth accumulation. Domestic criticisms on economic disenchantment to emptiness, financial alienation and chaos, capital barbaric growth and disorderly expansion are emerging one after another. Of course, finance is not only negative. There are many scholars who emphasize how the financial revolution promoted the British Industrial Revolution, how the backwardness of China’s finance led to the so-called “great diversion between China and the west” and the role of Finance in catching up. What they say seems to be the “finance” of another world.
There are different opinions on the merits and demerits of finance. However, since the current round of international financial crisis, a series of financial narratives with gray tone have more pointed to the problem of uneven distribution (rather than growth in the general sense), but they have special enlightenment: if we want finance to be better, better serve the real economy, reduce rather than exacerbate inequality, and promote inclusive development and common prosperity, we need to grasp the financial characteristics, clarify the financial positioning and promote financial reform, Reshape financial development.
1、 Brief literature review
Finance, the simplest understanding, is dealing with money, which has nothing to do with the poor. The modern finance’s “dislike the poor and love the rich” is determined by the finance’s own logic – it selects customers, sets thresholds and demands mortgages under the condition of asymmetric information, mainly to avoid risks (sometimes to reduce costs), so that it can live and pursue commercial sustainability. In this way, financial research seems to have become the economics of the rich; To let finance take care of the poor and promote common prosperity is quite different. From another perspective, as an important lever to leverage modern economic growth and help wealth creation and accumulation, finance can be imagined to expand the gap between the rich and the poor when it turns the poor out. Here, finance is not only irrelevant to common prosperity, but also a factor to increase the gap between the rich and the poor. Of course, we can also find typical cases of good finance, serving the poor and promoting common prosperity, but we always feel that the system and mechanism are not perfect, and the road from finance to common prosperity is still very tortuous. It is these “reasonable” but conflicting views that urge us to think deeply about the relationship between financial development and common prosperity.
How does finance affect inequality? This is a very grand theme that has long been ignored by the academic community.
In the early stage, the problem of inequality was dispelled by western mainstream economics. For example, according to the theory of marginal productivity, land gets land rent, capital gets interest and labor gets wages. Therefore, there is no distribution problem. Marginal productivity distribution theory puts forward that each factor of production obtains the corresponding return according to its own contribution. In fact, it explains the efficiency and perfection of the market from another angle and demonstrates the greatness of Smith’s “invisible hand”. But it also makes the discussion of income inequality lose its place in the framework of western mainstream economics. In addition, neoclassical economics believes that money and finance is just a “veil” and will not have a substantive impact on the real economy, especially growth. Since the impact of money and finance is “neutral”, there is little discussion on how finance affects inequality.
The distributive effect of financial development has been implied in the research of financial development and economic growth, and it did not get real attention until the 1990s. This is related to the rapid advancement of financial liberalization and financial globalization since the 1970s and 1980s and the continuous expansion of the gap between the rich and the poor in developed economies.
Three landmark papers on the relationship between finance and inequality are Banerjee & Newman (1993), galor & zeira (1993) and Greenwood & Jovanovic (1990). The first two papers believe that more developed financial markets will reduce income inequality. The third paper holds that there is an “inverted U” relationship between financial development and inequality: in the early stage of financial development, social benefits are small, resulting in increased income inequality; When finance develops to a certain stage, more finance will help reduce income inequality. The main theoretical mechanism is that the improvement of credit availability allows more families to choose and make decisions based on the reasonable arrangement of expenditure without being affected by inherited wealth.
The research on financialization initiated by Epstein (2005) and others is mainly based on the experience of developed economies, pointing out that financialization leads to inequality. Philippon & Reshef (2012) found that the expansion of the financial sector since 1980 is an important factor affecting the continuous and significant expansion of the income gap in the United States. Shakhnov (2014) also found that financial development will lead to widening income gap based on US data. Brei et al (2018) empirically studied the relationship between financial structure and income inequality. Using data from 97 economies from 1989 to 2012, they found that the relationship between the two was not monotonous. On the one hand, when the level of financial development is not very high, more finance has reduced income inequality; On the other hand, when finance develops to a certain height, if it is market-based financial expansion, inequality will intensify; If it is through the financial expansion of bank loans, inequality will not expand.
The World Bank (demirg kunt & Levine, 2009) and the International Monetary Fund have also carried out a more comprehensive combing and Research on finance and inequality. Their theoretical and empirical analysis shows that the mechanism of financial impact on inequality is more complex; Finance can promote growth and reduce inequality under certain conditions, but either financial repression (over regulation and underdeveloped financial markets) or financial overdevelopment (such as gold melting) may lead to increased inequality. Compared with the previous literature, the literature since the 2008 international financial crisis has paid more attention to the negative impact of Finance (especially the impact on distribution).
If you want to get the full report, you can contact us by leaving us the comment. If you think the information here might be helpful to others, please actively share it. If you want others to see your attitude towards this report, please actively comment and discuss it. Please stay tuned to us, we will keep updating as much as possible to record future development trends.
RecordTrend.com is a website that focuses on future technologies, markets and user trends. We are responsible for collecting the latest research data, authority data, industry research and analysis reports. We are committed to becoming a data and report sharing platform for professionals and decision makers. We look forward to working with you to record the development trends of today’s economy, technology, industrial chain and business model.Welcome to follow, comment and bookmark us, and hope to share the future with you, and look forward to your success with our help.
