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Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil

Julia Fonseca and Adrien Matray
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Julia Fonseca: University of Illinois at Urbana-Champaign
Adrien Matray: Princeton University, NBER, and CEPR

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

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: Brazil; Financial Inclusion Policy; Wage Inequality; Banks (search for similar items in EconPapers)
JEL-codes: D63 E24 E58 G21 J30 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-des, nep-dev, nep-fle, nep-lam, nep-mfd, nep-pay and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:308

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