World Scientific
  • Search
  •   
Skip main navigation

Cookies Notification

We use cookies on this site to enhance your user experience. By continuing to browse the site, you consent to the use of our cookies. Learn More
×

System Upgrade on Tue, May 28th, 2024 at 2am (EDT)

Existing users will be able to log into the site and access content. However, E-commerce and registration of new users may not be available for up to 12 hours.
For online purchase, please visit us again. Contact us at [email protected] for any enquiries.
Special Issue on Financial Inclusion, Financial Stability and Income Inequality; Guest Editors: Naoyuki Yoshino, Asian Development Bank Institute and Peter Morgan, Asian Development BankFree Access

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

    https://doi.org/10.1142/S0217590818410047Cited by:53 (Source: Crossref)

    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.

    JEL: D63, F63, F65, G21, H23, O15

    References

    • Acemoglu, D and JA Robinson [2014] The Rise and Fall of General Laws of Capitalism. MIT Press. Google Scholar
    • Amidžić, G, A Massara and A Mialou (2014). Assessing countries’ financial inclusion — A new composite index. IMF Working Paper. WP/14/36. Google Scholar
    • Barro, RJ (2008). Inequality and growth revisited. Working Paper Series on Economic Integration No. 11, Asian Development Bank. Google Scholar
    • Cámara, N and D Tuesta (2014). Measuring financial inclusion: A multidimensional index. BBVA Research Working Paper, 14/26. Google Scholar
    • Chakrabarti, A [2000] Does trade cause inequality? Journal of Economic Development, 25 (2), 1–21. Google Scholar
    • Demirguc-Kunt, K, L Klapper and D Singer (2017). Financial inclusion and inclusive growth. A review of recent empirical evidence. Policy Research Working Paper 8040, The World Bank. Google Scholar
    • Gupta, S, H Davoodi and R Alonso-Terme (1998). Does corruption affect income inequality and poverty; IMF Working Paper WP/98/76. Google Scholar
    • Honohan, P [2007] Cross-Country Variation in Household Access to Financial Services”, Conference Access to Finance, Washington DC: The World Bank. Google Scholar
    • IMF (2014). Fiscal policy and income inequality, IMF Policy Paper. Google Scholar
    • Joumard, I, M Pisu and D Bloch (2012). Tackling Income Inequality. The Role of Taxes and Transfers, OECD Journal: Economic Studies, 2012/1. Google Scholar
    • Kuznets, S [1955] Economic growth and income inequality. The American Economic Review, 45 (1), 1–28. Web of ScienceGoogle Scholar
    • Park, C and RV Mercado Jr. (2015). Financial inclusion, poverty, and income inequality in developing Asia. ADB Economics Working Paper Series, No. 426. Google Scholar
    • Quadrini, V and JV Ríos-Rull [2014] Inequality in macroeconomics, In NH Handbook of Income Distribution, Chapter 15, Vol. 2B, AB AtkinsonFJ Bourguignon (eds.),. Google Scholar
    • Sarma, M (2008). Index of financial inclusion. Working Paper No. 215, Indian Council for Research on International Economic Relations. Google Scholar
    • Sarma, M (2012). Index of financial inclusion — A measure of financial sector inclusiveness. Working Paper No. 07/2012, HTW’s Competence Centre Money, Trade, Finance and Development. Google Scholar
    • Townsend, RM and K Ueda [2006] Financial deepening, inequality and growth: A model-based quantitative evaluation. Review of Economic Studies, 73, 251–293. Crossref, Web of ScienceGoogle Scholar