Legal Origin, Financial Development and Inequality: Finding another Approach to Explain the Relatively High Inequality Level in Latin America

Inequality is becoming a more and more concerning problem for many places all over the world. Based on both historical and cross-national data, this paper found that financial development plays a crucial role in reducing inequality. Using legal origin as an instrumental variable, financial development affects Gini index negatively. Thus the underdevelopment of financial system in Latin America can help to explain the relatively high inequality level in this region.