Distributional Effects of Crises : The Role of Financial Transfers

Financial crises affect income distribution via different channels. We argue that financial transfers is an important channel, which has been overlooked by the literature. By analyzing data from the Mexican (1994-1995) and Argentine (2001-2002) crises, we investigate two types of financial transfers. First, we study transfers to the financial sector, going from non-participants to participants of the financial sector. Second, we explore transfers within the financial sector, which are transfers among participants of the financial sector, as those from small to large and foreign depositors. Our analysis suggests that financial transfers increase income inequality