Financial development, income inequality and governance institutions

  • Cristiano Perugini University of Perugia, Department of Economics, Italy; IZA Institute of Labor Economics, Bonn, Germany; FREN, Belgrade, Serbia
  • İpek Tekin Cukurova University, Department of Economics, Turkey


The paper investigates empirically how governance institutions mediate the link between financial development and inequality. To this aim, we assemble a dataset of 48 middle- and high-income countries for the period 1996-2014. Results, obtained by means of instrumental variables dynamic panel data models, reveal that financial development is pro-inequality; however, the strength of the relationship is attenuated in contexts with stricter control of corruption, better regulatory quality, political stability and rule of law. Institutional domains less directly related to the market economy – political voice and accountability and government effectiveness – do not play any mediating role. 

Keywords: Financial development, Income inequality, Governance institutions. 

JEL: G00, G28, O15, O16,

How to Cite
Perugini C., & Tekin İ. (2022). Financial development, income inequality and governance institutions. Panoeconomicus, 69(3), 353-379. doi:10.2298/PAN191022004P
Original scientific paper