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- Title
Wealth inequality and financial development: revisiting the symmetry breaking mechanism.
- Authors
Zhang, Haiping
- Abstract
Matsuyama (Econometrica 72(3):853-884, 2004) shows that financial integration may lead to income polarization among inherently identical countries, if these countries are financially underdeveloped, a result he calls 'symmetry breaking.' By introducing the minimum investment requirement and within-country wealth inequality into Matsuyama's framework, I show that wealth inequality is as important as financial development in determining the possibility of symmetry breaking. I then address three practical issues in this model, e.g., the conditions of financial integration, the domestic financial crisis and capital controls, and the world interest rate changes and income volatility.
- Subjects
ECONOMIC development; INCOME inequality; ECONOMETRICS; FINANCIAL crises; MARKET volatility
- Publication
Economic Theory, 2017, Vol 63, Issue 4, p997
- ISSN
0938-2259
- Publication type
Article
- DOI
10.1007/s00199-016-0977-0