ABSTRACT
In this chapter we study how some institutional settings related to the quality of governance affect the link between financial development and income inequality. To this aim, we assemble a dataset of 48 developed and developing countries for the period 1996–2014. Results, obtained by means of the panel fixed effects model, instrumental variable approach, and threshold regression models, reveal that financial development is pro-inequality. However, the strength of the relationship is attenuated in context with better voice and accountability, and magnified by higher regulatory quality, government effectiveness, and better rule of law.
