Role of Institutional Quality and Financial Development in Income Inequality in Selected Asian Countries

Abstract

Most developing economies have seen rising income disparity over time, along with economic growth
and labor force participation. There are several reasons that could exacerbate economic disparity in
these nations. The scholar’s income disparity has been discussed by researchers and officials. However,
this type of partnership lacks harmony. For panel data of particular Asian nations, we analyze the
detrimental link of institutional quality, financial development, and income disparity. The findings of
show that improvements in institutional quality, financial development, and labor force participation
lower income disparity. However, both the GDP and the unemployment rate tend to widen the income
gap. The study finds that having access to credit or financial development may reduce inequality in
developing economies, thus it is important to provide financial access and literacy to the poor and
underprivileged sectors of society. Institutions must be a key component of this. However, by actively
and effectively participating in the workforce, individuals may help to lessen economic disparity. As a
result, it is imperative to ensure that both men and women have equal access to the labor force.
Moreover, through regulatory and financial sector changes, the government must play a clear role in
achieving fair income distribution or reducing poverty.