FINANCIAL INCLUSION, RATHER THAN SIZE, IS THE KEY TO TACKLING INCOME INEQUALITY

David Martínez Turégano and Alicia Garcia Herrero

The Singapore Economic Review (SER), 2018, vol. 63, issue 01, 167-184

Abstract: In this paper, we assess empirically whether financial inclusion contributes to reducing income inequality when controlling for other key factors, such as economic development and fiscal policy. We conclude that financial inclusion contributes to reducing income inequality to a significant degree, while the size of the financial sector does not. Although our results are still preliminary and constrained by data limitations, they still bear significant policy implications. More specifically, fostering financial inclusion has one more important by-product, which had hardly been analyzed yet, namely reducing income inequality. More specifically, given the broad definition of financial inclusion used in our analysis, promoting financial inclusion implies facilitating the use of credit to low-income households, as well as granting credit to small and medium-sized enterprises.

Keywords: Income distribution; income inequality; Kuznets curve; financial development; financial deepening; financial inclusion (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (35)

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Working Paper: Financial inclusion, rather than size, is the key to tackling income inequality (2015)
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DOI: 10.1142/S0217590818410047

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