Le Développement Financier et la Problématique de Réduction de la Pauvreté

This paper addresses the relationship between financial development and poverty, taking into account the direct link and the indirect link through economic growth. Using a panel of 81 developing countries over 1988-1997, we find evidence that financial development reduces the headcount poverty index, even after controlling for mean income effect. Depending on the financial development indicator used, this direct effect ranges from 8 to 21% of the total effect. Previous research focused only on the indirect effect. Thus they might have underestimated the potential poverty reduction effect of the development of financial system.