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

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, w...

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Bibliographic Details
Published in:Singapore economic review 2018-03, Vol.63 (1), p.167-184
Main Authors: TURÉGANO, DAVID MARTÍNEZ, HERRERO, ALICIA GARCÍA
Format: Article
Language:English
Subjects:
Development policy
Economic development
Economic theory
Financial inclusion
Fiscal policy
Households
Income inequality
Low income groups
Small & medium sized enterprises-SME
Studies
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Summary: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.
ISSN:0217-5908
1793-6837
DOI:10.1142/S0217590818410047