In order to better understand how finance causes income inequality and to comprehend the ontology of this relationship, the dataset (14 OECD countries from 1980 to 2017) is employed to study the long-run effects of financialization and neoliberalism on several alternative measures of income inequality across countries classified as neoliberal (the United States, the United Kingdom, Canada, and Australia); Nordic (Denmark, Finland, Sweden, and Norway); and social-corporatist (France and Germany).

The paper develops a Dynamic Panel Autoregressive Distributed Lag (ARDL) model that controls for indicators of globalization, business cycles, and other variables in an attempt to isolate the unbiased causal effects of financial variables on income inequality.

Our evidence shows that neoliberalism and financialization have increased disposable income disparity in the upper-tail and lower-tail of income distribution within countries.

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