Financial Inclusion and Racial Wealth Inequality

Rong Hai ()
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Rong Hai: Department of Economics, University of Miami

No wp2021-02, Working Papers from University of Miami, Department of Economics

Abstract: Lack of access to the financial system can increase wealth inequality. This is because without savings and investment opportunities, incentives to save and work decline. In this paper, I quantify the effects of racial differences in financial access on observed wealth gap. I employ a structural model of schooling, labor supply, and savings with differential access to savings and borrowing technology. Differential access to financial institutions explains about a tenth of U.S. racial wealth gap. Counterfactual experiments show that financial inclusion policies can increase net worth of African Americans relatively more, thus reducing racial wealth inequality.

Keywords: Wealth Inequality; Financial Inclusion; Banking Access; Unbanked. (search for similar items in EconPapers)
JEL-codes: I2 J2 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2021-10-06
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Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:wp2021-02

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