Inequality and the finance you know: does economic literacy matter?

In a sample of advanced and developing countries observed over the 1980–2007 period, this paper documents that the ability to use financial instruments and deal with financial market complexity that indicators of economic literacy proxy for is significantly and robustly associated to a lower variation in income inequality. The direct association between financial development and inequality usually referred to as the “finance-inequality nexus”, instead, is not significant in long-run regressions that control for the level of economic literacy nor in panel regressions.