Financial inclusion and income distribution revisited: New findings

Takeshi Inoue

The Quarterly Review of Economics and Finance, 2024, vol. 98, issue C

Abstract: Most previous studies have quantitatively shown that progress in financial inclusion reduces income inequality. This study uses linear and squared terms of financial inclusion to analyze whether and how its effect on reducing income inequality changes over time. Financial inclusion is measured using a composite indicator that considers factors such as accessibility, availability, and actual use of financial services. The analysis utilizes panel data from 2004 to 2021 and samples comprising all countries or only developing countries. The empirical results for both samples indicate that the linear and squared terms of financial inclusion have negative and statistically significant effects on income inequality. Therefore, financial inclusion can reduce income inequality, and the marginal effect increases as financial inclusion progresses. The empirical results also indicate that such effects vary depending on the dimension of financial inclusion (i.e., access versus use) and type of financial services considered (i.e., bank accounts versus loans). For example, when financial inclusion is measured solely in terms of borrowing from formal financial institutions, the financial inclusion and income inequality relationship may be U-shaped. Therefore, different aspects of financial inclusion may affect income inequality differently over time.

Keywords: financial inclusion; income inequality; nonlinearity; panel analysis (search for similar items in EconPapers)
JEL-codes: D31 G21 O11 O15 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976924001467
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:98:y:2024:i:c:s1062976924001467

DOI: 10.1016/j.qref.2024.101940

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().