Effect of Bank-Based or Market-Based Financial Systems on Income Distribution in Selected Countries

Abstract

The main goal of this research is to estimate the effect of bank-based and market-based financial systems on income distribution using the data of 15 developed and developing countries. For this purpose, firstly the type of financial system for selected countries was determined. Then the model of research was estimated applying the FMOLS method. In the next step, using OLS method in panel data, the effect of the type of financial system on income distribution of the two groups of developed and developing countries was estimated in order to come up with a better conclusion. The results indicated that the type of financial system affects income distribution. Market-based financial system leads to better income distribution in developed countries, while bank-based financial system reduces income inequality in developing countries.