EconPapers    
Economics at your fingertips  
 

The Real Effects of Banking the Poor: Evidence from Brazil

Julia Fonseca and Adrien Matray
Additional contact information
Julia Fonseca: University of Illinois at Urbana-Champaign
Adrien Matray: Princeton University

Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: We study how financial development affects economic development and wage inequality. We use a large expansion of government-owned banks into Brazilian cities with low bank branch coverage and combine it with data on the universe of employees from 2000–2014. We find that higher financial development fosters firm growth, higher labor demand, and higher average wages, especially for cities initially in banking deserts. However, these gains are not shared equally. Instead, they increase with workers’ productivity, implying a substantial increase in wage inequality. The changes to 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. Our results are inconsistent with alternative explanations such as differential exposure to Brazil’s economic boom, an overall increase in government lending, and other government or social welfare programs. These results motivate embedding skill heterogeneity into macro-finance development models in order to capture these distributional consequences.

Keywords: Banking; Economic Development; Financial Development; Wage Inequality (search for similar items in EconPapers)
JEL-codes: O10 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-fdg, nep-lam, nep-lma and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://gceps.princeton.edu/wp-content/uploads/2022/04/wp293_Matray_Fonseca.pdf

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:pri:cepsud:293

Access Statistics for this paper

More papers in Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().

 
Page updated 2024-04-15
Handle: RePEc:pri:cepsud:293