Distributional Effects of Crises: The Financial Channel
World Bank Policy Research Working Paper No. 3173
59 Pages Posted: 16 Jul 2011
Date Written: June 1, 2004
Financial crises affect income distribution via different channels. This paper argues that there is an important channel overlooked by the literature, namely the financial channel. We study how this channel operates by analyzing data from several Latin American countries, including Argentina, Bolivia, Chile, Ecuador, Mexico, Peru, and Uruguay. First, we investigate financial transfers from non-participants to participants of the financial sector. Second, we explore who receives these transfers and what other reallocations occur within the financial sector. Our analysis shows that financial redistributions during crises are large, benefiting the rich and hurting the poor.
Keywords: Financial crises, distributional effects, financial transfers, inequality, income distribution, access to finance
JEL Classification: E44, E60, F41, G20, I32
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