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http://dx.doi.org/10.13106/jafeb.2020.vol7.no5.111

The Impact of Credit on Income Inequality in Vietnam  

LE, Quoc Hoi (Faculty of Economics, The National Economics University)
NGUYEN, Bich Ngoc (School of Trade and International Economics, National Economics University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.5, 2020 , pp. 111-118 More about this Journal
Abstract
This paper examines the impacts of credit on income inequality in Vietnam. Though it is one of the most common measures of financial development, there is a dearth of research in this area. Unlike previous studies, the paper disaggregates the impact of each type of credit on income inequality, looking at the Gini coefficient. We employ the Generalized Method of Moment (GMM) to solve the endogenous problem. The primary data set contains a panel of 60 Provincial observations, from data collected from the General Statistics Office of Vietnam from 2002 to 2016. The empirical findings show that, while commercial credit increases income inequality, policy credit contributes to reducing income inequality in Vietnam. The results also confirm the important roles of education, institutional quality and foreign direct investment in fighting against income inequality in Vietnam. However, the paper does not provide adequate evidence to support the inverted U-shaped relationship between credit and income inequality. Based on the findings, we argue that the government should direct flows of credit to real economic activities rather than speculative investment; more bank credit should be allocated to rural areas and agriculture; and favorable credit programs should be designed to promote education, especially of those living in rural areas.
Keywords
Credit; Income Inequality; Vietnam;
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Times Cited By KSCI : 4  (Citation Analysis)
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