The pattern of income distribution can be influenced by financial evelopment.
Using provincial data, this paper empirically investigates the relationship between
financial development and income inequality in Vietnam from 2002 to 2008. The
results show that financial development has a positive impact on reducing income
inequality, which is consistent with the bulk of theoretical and empirical research.
The results also confirms that financial development when it interacts with education
has joint-effects on reducing income inequality. We also find no evidence supporting
the Greenwood-Jovanovic hypothesis of an inverted U-shaped relationship between
the financial sector of development and inequality.