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Financial Inclusion and Racial Wealth Inequality

Author

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  • Rong Hai

    (Department of Economics, University of Miami)

Abstract

Lack of access to the financial system can increase wealth inequality. This is because without savings and investment opportunities, incentives to save and work decline. In this paper, I quantify the effects of racial differences in financial access on observed wealth gap. I employ a structural model of schooling, labor supply, and savings with differential access to savings and borrowing technology. Differential access to financial institutions explains about a tenth of U.S. racial wealth gap. Counterfactual experiments show that financial inclusion policies can increase net worth of African Americans relatively more, thus reducing racial wealth inequality.

Suggested Citation

  • Rong Hai, 2021. "Financial Inclusion and Racial Wealth Inequality," Working Papers wp2021-02, University of Miami, Department of Economics.
    • Handle: RePEc:mia:wpaper:wp2021-02
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3919250
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    More about this item

    Keywords

    Wealth Inequality; Financial Inclusion; Banking Access; Unbanked.;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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