Analyzing the Mediating Role of Human Capital in the Relationship Between Financial Development and Income Inequality in Natural Resource-Dependent Economies: A Dynamic Development Management Approach
Keywords:
Financial Inclusion, Income Inequality, Population Aging, Dynamic Approach, Economic ManagementAbstract
This study, by applying the new paradigm of sustainable development management and using a hybrid theoretical framework that comprehensively considers the institutional, structural, human, and environmental dimensions of financial development in natural resource-dependent economies, provides an in-depth analysis of the pivotal role of human capital as a key mediating mechanism in the dynamic relationship between financial development and income inequality. Using dynamic panel data from twenty-two natural resource-dependent countries during the period 2012 to 2023, and using advanced hierarchical dynamic structural equation modeling methodology, the present study analyzes the direct, indirect, and interactive paths of financial development on income inequality, considering the multilevel mediation role of human capital. The research findings show that financial development affects income distribution through three separate channels: on the one hand, it has a direct and significant effect on reducing income inequality, on the other hand, it exerts a significant indirect effect on improving income distribution through strengthening human capital, and through its interaction with institutional quality, it has a compound effect on income distribution. Based on the results obtained, the share of the indirect effect through human capital constitutes about forty percent of the total effect of financial development on income inequality, which indicates the pivotal role of this variable in transferring the effects of financial development to the field of income distribution. Also, dependence on natural resources has been identified as a moderating variable that, by weakening the positive effects of financial development on income distribution, prevents the full realization of the potential for reducing inequality through financial sector development. By introducing an integrated analytical model and quantifying direct, indirect, and interactive effects, this research provides significant theoretical and methodological contribution to the literature on the subject and has important policy implications for designing strategies to reduce inequality within the framework of development management in natural resource-dependent economies. The findings of this study show that investment in human capital acts not only as a development goal, but also as a mechanism that enhances the effects of financial development on reducing income inequality. This new understanding of the dual role of human capital opens up new horizons for development policymaking in resource-based economies and emphasizes the need to simultaneously address financial development and human capital in inequality reduction strategies. By providing a new conceptual model, this study opens new avenues for future research in the fields of development management and resource economics.
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Copyright (c) 2025 Ali Jaafar Nedher (Author); Hossein Sharifi Renani (Corresponding author); Salam Mounam Zamil, Masoud Ramezani (Author)
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