Aslan and et al.’s (2017) cross-country regressions concluded
that financial inclusion was linked to income inequality. The study explored
the impact of inequality focusing on gender in access to finance on income
inequality. The effect of financial development on poverty and inequality was
examined by the current studies. However, there were no cross country analysis
which looked into financial inclusion and income inequality. The authors
particularly focused on sub-Saharan Africa, where both gender and income inequality
persists more compared to other regions. The authors utilized the Findex data to
construct an index of financial inclusion. The author’s conclusion was that at
the country level, unequal financial access was significantly related to the
higher income inequality. The authors used the 2011 data for the empirical
analysis given that income inequality data are only available till 2013 with a
lag.  They constructed indices for both
2011 and 2014.

 

Although the theory points out to a link between
financial access and income inequality, the literature has primarily examined
the relationship between financial depth and income inequality. While the
theory is disconcerted on the course of causality between financial development
and income inequality, empirical studies demonstrated significant impact of
financial development on income inequality. 
Beck, Demirguc Kunt and Levine (2007) concluded that financial
development disproportionately enhances the income of the poor and reduces income
inequality.  Their findings showed that
financial reforms which aim at diminishing market frictions can increase growth
without distorting redistributive policies. Conducting a panel data analysis of
22 sub-Saharan African countries for the years from 1999 to 2004, Batuo and et
al. (2010) found that income inequality decreases, as the countries develop
their financial sector.

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