Financial Development and Inequality - A critique of theoretical foundations of published texts in Iran

The relationship between financial development and inequality is one of the topics that has been studied in many theoretical and empirical studies, but there is still no consensus among economic theorists on this. In Iran, a lot of studies have been done on the relationship between financial development and inequality. These study mainly based on the Greenwood and Jovanovic’s nonlinear hypothesis or the Banerjee and Newman’s negative linear hypothesis. And researchers, depending on the number of observations, the type of observation, and the functional form they used, have obtained different results in verifying one of these hypotheses. Since the late 1990s, theoretical literature on financial development and inequality has undergone a major transformation, and economic theorists have introduced new channels for the impactof financial development on inequality, which is mainly not considered in the studies carried out in Iran. In this article, firstly, the theoretical foundations of the studies conducted in Iran are criticized, and then some of the most important new approachespresented regarding the relationship between financial development and inequality are explained briefly.