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Which financial inclusion indicators and dimensions matter for income inequality? A Bayesian model averaging approach

Author

Listed:
  • Rogelio Mercado

    (The SEACEN Centre)

  • Victor Pontines

    (The SEACEN Centre)

Abstract

This paper employs Bayesian model averaging (BMA) and uses posterior inclusion probability (PIP) values to evaluate which financial inclusion indicators, dimensions, and other determinants of income inequality should be considered in an empirical specification assessing the relationship between financial inclusion and income inequality, given model uncertainty. The results show that for the lower income country group, financial access and usage indicators are the most relevant financial inclusion indicators. For financial inclusion dimension, we find evidence on the importance of financial access. However, the results for upper income country group are different, suggesting the need to differentiate between the two groups in assessing the importance of financial inclusion on income inequality. These results suggest that theoretical models linking financial inclusion and income inequality could well focus on the role of financial access by providing theoretical foundations on the mechanics as to how this dimension of financial inclusion impact income inequality particularly for lower income countries.

Suggested Citation

  • Rogelio Mercado & Victor Pontines, 2024. "Which financial inclusion indicators and dimensions matter for income inequality? A Bayesian model averaging approach," Empirical Economics, Springer, vol. 67(2), pages 609-654, August.
    • Handle: RePEc:spr:empeco:v:67:y:2024:i:2:d:10.1007_s00181-024-02559-2
    DOI: 10.1007/s00181-024-02559-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Bayesian model averaging; Financial inclusion; Income inequality; Bayesian inference;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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