The effect of bank credit composition on income distribution in developing countries

Subject Areas : Labor and Demographic Economics

Ali Nasiri Aghdam ¹ , mitra babapour ²

1 - Assistant Professor, Department of Economic Development and Planning, Faculty of Economics, Allameh Tabatabai University, Tehran, Iran
2 - PhD student in Economics, Allameh Tabatabai University, Tehran, Iran

Received: 2021-12-25 Accepted : 2022-03-06 Published : 2022-02-20

Keywords: G21, Financial Development, income inequality, Income distribution, JEL Classification: I30, Credit allocation, E51. Keywords: Bank Credits,

Abstract :

 The purpose of this paper is to investigate the effect of different types of bank loans on income inequality in the economies of 24 selected developing countries using the econometric method of panel data during the period 2000-2019. The results showed that credits to the non-financial sector as well as consumption reduce inequality and credits to the financial and housing sectors increase inequality. Lending to the non-financial sector has also been declining, and lending to the consumer, financial and mortgage sectors has been on the rise. The findings also showed that the employment rate and housing prices, respectively, affect the effect of loans granted to the non-financial and housing sectors on income inequality. It is recommended to allocate a significant portion of the credit to non-financial activates and to avoid lending for speculative housing activities. 

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