Analysis of the Financial Sector on Income Distribution: (Dynamic Panel Data Approach)

The relationship between financial development and income distribution is one of the main issues in the macroeconomic literature and has been considered empricially in recent years. Hence, the main aim of this paper is to investigate the impact of financial development on the income distribution during the 2001-2015 by applying dynamic panel data approach for selected countries of the OIC. The results of this study indicate that, the financial sector development in selected countries of the OIC has reduced income inequality. The effect of financial development on poverty is positive and significant at 5% level. Based on these results a percentage increase in the index of financial development, leading to increased consumption per capita cost at 0.07 percent and reduce poverty in selected countries of the OIC. By the results of this paper, the main policy implication of this study is that the policy makers in thease countries should adopt the monetary policies to emprove the income distribution of reduce the poverty.