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Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil

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Listed:
  • Julia Fonseca
  • Adrien Matray

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.

Suggested Citation

  • Julia Fonseca & Adrien Matray, 2022. "Financial Inclusion, Economic Development, and Inequality: Evidence from Brazil," NBER Working Papers 30057, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30057
    Note: CF DEV LS PR
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    Cited by:

    1. Natalie Bau & Adrien Matray, 2023. "Misallocation and Capital Market Integration: Evidence From India," Econometrica, Econometric Society, vol. 91(1), pages 67-106, January.
    2. Nirupama Kulkarni & Kanika Mahajan & S.K. Ritadhi, 2023. "Bank Branch Expansions and Capital Investment by Credit Constrained Firms," Working Papers 93, Ashoka University, Department of Economics.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • H8 - Public Economics - - Miscellaneous Issues
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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