Role of technological innovation for enhancing financial inclusion to reduce income inequality in BRICS economies

Muhammad Suhrab (), Chen Pinglu () and Ningyu Qian ()
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Muhammad Suhrab: Huazhong University of Science and Technology (HUST), School of Management
Chen Pinglu: Huazhong University of Science and Technology (HUST), School of Management
Ningyu Qian: Huazhong University of Science and Technology (HUST), School of Management

Asia-Pacific Journal of Regional Science, 2025, vol. 9, issue 4, No 10, 1145-1180

Abstract: Abstract This study examines the intricate relationships between technological innovation, financial inclusion and income inequality (GINI) in BRICS countries (Brazil, Russia, India, China, and South Africa) using advanced econometric techniques, including structural equation modeling and instrumental variable estimation. The findings exhibit that technological innovation, measured by research and development (R&D) expenditures, researcher density (RM), and mobile cellular subscriptions (MCS), significantly promotes financial inclusion with heterogeneous effects. While financial inclusion emerged as an essential channel for reducing income inequality, the direct impact of technological innovation on inequality presents a nuanced dynamic. Specifically, RM and MCS contribute to narrowing income disparities, whereas R&D reveals a counterintuitive positive relationship with GINI, indicating that knowledge-intensive innovations may disproportionately benefit higher-income groups. Macroeconomic and institutional factors, including trade openness, governance quality and inflation further shaped financial inclusion and inequality outcomes. Robustness checks, including two-stage least squares and dynamic panel estimations confirmed the causal validity of these relationships for mitigating endogeneity concerns. The findings highlight an imperative for policymakers to ensure equitable access to financial technologies by enhancing digital literacy, strengthening financial infrastructure and fostering inclusive regulatory frameworks. Future research should investigate additional moderating variables, such as education and social protection policies, and extend the analysis beyond BRICS economies to enhance the generalizability of the results.

Keywords: Income inequality; Financial inclusion; Technological innovation; BRICS; Structural equation modeling; Instrumental variables (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s41685-025-00375-9

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