The finance-inequality nexus in the BRICS countries: evidence from an ARDL bound testing approach

Increasing inequality keeps any economy stuck in the middle-income group despite its strong growth. The largest of the middle-income economies are the BRICS countries (Brazil, Russia, India, China and South Africa). In this paper we intend to investigate the long run relation between financial development and income inequality and the shape of the curve that describes it for the BRICS countries. We will tests the Greenwood and Jovanovich (1990) hypothesis by estimating an Autoregressive Distributed Lag (ARDL) for the period 1980-2017. We found evidence for an inverted U-shaped curve relation in Brazil, Russia, India and China; which validate the GJ hypothesis.