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Financial inclusion, economic development, and inequality: Evidence from Brazil

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  • Fonseca, Julia
  • Matray, Adrien

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.

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  • Fonseca, Julia & Matray, Adrien, 2024. "Financial inclusion, economic development, and inequality: Evidence from Brazil," Journal of Financial Economics, Elsevier, vol. 156(C).
    • Handle: RePEc:eee:jfinec:v:156:y:2024:i:c:s0304405x24000771
    DOI: 10.1016/j.jfineco.2024.103854
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    More about this item

    Keywords

    Financial inclusion; Economic development; Inequality;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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