Cross-country regressions conducted by Aslan andothers (2017) point out that financial inclusion is associated to incomeinequality.
The study analyzed the impact of inequality (restricted by gender)in access to finance on income inequality. The current literature looks at the impactof financial development on poverty and on reducing inequality. Yet, there areno cross country analysis which examined financial inclusion and incomeinequality. The authors particularly analyzed sub-Saharan Africa, where bothgender and income inequality persist more than other regions. The authorsutilized the Findex database to construct an index of financial inclusion. Theauthors concluded that at the country level, unequal financial access issignificantly associated with higher income inequality.
The authors used the2011 data for the empirical analysis given that income inequality data are onlyavailable till 2013 with a lag. Theyconstructed indices for both 2011 and 2014. Although the theory points out to a link betweenfinancial access and income inequality, the literature has primarily examinedthe relationship between financial depth and income inequality. While thetheory is disconcerted on the course of causality between financial developmentand income inequality, empirical studies demonstrate robust impact of financialdevelopment on income inequality. Beck,Demirguc Kunt and Levine (2007) concluded that financial developmentdisproportionately enhances the income of the poor and decreases incomeinequality.
According to their findings,financial reforms which aim at diminishing market frictions can increase growthwithout distorting redistributive policies. Covering a panel data analysis of22 sub-Saharan African countries for the years from 1999 to 2004, Batuo and etal. (2010) found that income inequality decreases, as the countries developtheir financial sector.