Financial openness and wealth inequality: The moderating role of financial development

초록

This study examines how financial openness affects wealth inequality and whether this relationship depends on financial development. Existing research has focused mainly on income inequality and provides mixed evidence, leaving the impact on wealth concentration largely unexplored. Using panel data for 104 countries from 1995 to 2022, we combine dynamic panel estimation with threshold techniques to test for nonlinear effects. The results show that financial openness increases wealth inequality in countries with low levels of financial development. However, this effect weakens and reverses as financial systems deepen beyond a critical threshold. Mechanism analysis indicates that entrepreneurship, innovation, and human capital accumulation transmit these effects. These findings suggest that the distributional consequences of financial openness depend fundamentally on domestic financial capacity, underscoring the importance of sequencing financial reforms to promote inclusive wealth accumulation.

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