Financial inclusion, economic development, and inequality: Evidence from Brazil

Julia Fonseca and Adrien Matray

Journal of Financial Economics, 2024, vol. 156, issue C

Abstract: We study a financial inclusion policy targeting Brazilian cities with low bank branch coverage using data on the universe of employees from 2000–2014. The policy leads to bank entry and to similar increases in both deposits and lending. It also fosters entrepreneurship, employment, and wage growth, especially for cities initially in banking deserts. These gains are not shared equally and instead increase with workers’ education, implying a substantial increase in wage inequality. The changes in inequality are concentrated in cities where the initial supply of skilled workers is low, indicating that talent scarcity can drive how financial development affects inequality.

Keywords: Financial inclusion; Economic development; Inequality (search for similar items in EconPapers)
JEL-codes: G20 J24 O10 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:156:y:2024:i:c:s0304405x24000771

DOI: 10.1016/j.jfineco.2024.103854

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