No. 565 - The Matthew effect and modern finance: on the nexus between wealth inequality, financial development and financial technology

by Jon Frost, Leonardo Gambacorta and Romina Gambacorta
June 2020
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There is growing empirical evidence from multiple countries that the wealthy are able to achieve higher financial returns. This accumulation by the wealthy is often called the "Matthew effect" in the social sciences. This paper analyses how the development of the financial sector and progress in financial technology have contributed to higher returns. It assesses whether these benefits could be greater for the wealthiest households, and therefore contribute to an increase in wealth inequality.

The results show that, while financial development and innovations in financial technology offer benefits to all households in Italy, they seem to benefit the wealthiest more. In recent years, the advantages for richer investors appear to have moderated, in parallel with a reduction in the number of bank branches and a more widespread use of remote banking services.

Published in: Journal of Economic Behavior & Organization, v. 202, pp. 429-451

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  1. 26 June 2020
    No. 565 - The Matthew effect and modern finance: on the nexus between wealth inequality, financial development and financial technology
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