Financial Development and Income Inequality: Evidence from Thailand

Abstract

Despite experiencing persistent income inequality, the Thai economy has continued to grow with a developing financial system. This study examines the relationship between financial development and income inequality in Thailand from 1980 to 2020. It is identified that a cointegration between financial development and income inequality follows a U-shape hypothesis. This result implies that income inequality reduced to a certain threshold in the early stage of financial development but subsequently increased as the financial system progressed. It is consequently recommended that policymakers prioritize creating an inclusive financial environment that promotes equitable access to financial services across all financial institutions, particularly for lower- and middle-income groups.