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Does Financial Inclusion Diminish Poverty and Inequality? A Panel Data Analysis for Latin American Countries

Author

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  • Eduardo Polloni-Silva

    (Federal University of São Carlos (UFSCar))

  • Naijela da Costa

    (Universidade Paulista (UNIP))

  • Herick Fernando Moralles

    (Federal University of São Carlos (UFSCar))

  • Mario Sacomano Neto

    (Federal University of São Carlos (UFSCar))

Abstract

Despite great developmental efforts in recent decades, Latin America still presents high levels of poverty and inequality when compared to developed nations. As explored widely in the literature, one potential instrument to diminish these issues is financial inclusion, including the access and usage of financial services by all people. Specifically, this paper verifies if financial inclusion and technology adoption decrease the poverty headcount ratio and the Gini index (i.e., inequality) of 13 Latin America countries (Argentina, Bolivia, Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, Panama, Paraguay, Peru, and Uruguay). To perform such analysis, an unbalanced panel dataset was built, and the Feasible Generalized Least Squares (FGLS) and the Limited Information Maximum Likelihood (LIML) techniques were employed. The results suggest that, in accordance with previous studies, financial inclusion is a powerful tool to tackle poverty and inequality. Additionally, the combined effects of financial inclusions and technology (i.e., mobile use) are also capable of decreasing the poverty and inequality levels. We discuss the policy implications of our findings and suggest a future research agenda.

Suggested Citation

  • Eduardo Polloni-Silva & Naijela da Costa & Herick Fernando Moralles & Mario Sacomano Neto, 2021. "Does Financial Inclusion Diminish Poverty and Inequality? A Panel Data Analysis for Latin American Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(3), pages 889-925, December.
    • Handle: RePEc:spr:soinre:v:158:y:2021:i:3:d:10.1007_s11205-021-02730-7
    DOI: 10.1007/s11205-021-02730-7
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