Income Inequality, Institutional Quality, and Trade Openness: An Analysis from Selected Asian Countries

Abstract

Income inequality with financial development has been observed in most of the Asian economies. A lot of major factors may strengthen this inequality in these countries. Despite discussions on this issue, the policymakers have not found harmony in this relationship. Considering this, we investigate the link between financial development, institutional quality, and income inequality by using panel data from 2008 to 2018. GMM results reveal that financial development, economic growth, and institutional quality lessen income inequality in Asian countries. It is concluded that more access to credit may lessen the inequality in Asian economies. So, there is a need to make easy the availability of credit facilities for the general public. Institutions should also play a positive and contributing role in decreasing income inequality.  Finally, political and economic stability also plays an active and effective role by attracting more involvement in economic activities and trade openness.