TY - JOUR
T1 - Financial inclusion, economic development, and inequality
T2 - Evidence from Brazil
AU - Fonseca, Julia
AU - Matray, Adrien
N1 - Philipp Schnabl was the editor for this article. We thank Victor Duarte and Chenzi Xu for their unfailing support and numerous discussions. We also thank Daniel Carvalho (discussant), Shawn Cole (discussant), Tatyana Deryugina, Pascaline Dupas, Melanie Morten, Chad Jones, Dean Karlan (discussant), Ben Moll, Tarun Ramadorai, Rebecca de Simone (discussant), Amit Seru, Yongseok Shin, Tracy Wang (discussant), and seminar participants at Stanford Economics, Stanford GSB, SITE Financial Regulation, the Finance-Organization-and-Markets Conference at Dartmouth, WashU Olin, Boston College, Queen Mary University, University of Pittsburgh, FGV-EPGE, Insper, University of S\u00E3o Paulo, HEC-Paris, the Brazilian Econometric Society Seminar, Cheung Kong University GSB, the Bank of Lithuania, University of Georgia, University of Arizona, Imperial College, Australian National University, the Women in Applied Microeconomics conference, the Wabash River Finance conference, the Central Bank of Brazil, NBER-SI, Central Bank of Italy, Tuck Dartmouth, McDonough-Georgetown, FED-board, John Hopkins Carey business school and Berkeley University for helpful comments. Filipe Correia, Thom\u00E1s Gleizer Feibert and Pablo Enrique Rodriguez provided superb research assistance.
PY - 2024/6
Y1 - 2024/6
N2 - 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.
AB - 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.
KW - Economic development
KW - Financial inclusion
KW - Inequality
UR - http://www.scopus.com/inward/record.url?scp=85191989606&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85191989606&partnerID=8YFLogxK
U2 - 10.1016/j.jfineco.2024.103854
DO - 10.1016/j.jfineco.2024.103854
M3 - Article
AN - SCOPUS:85191989606
SN - 0304-405X
VL - 156
JO - Journal of Financial Economics
JF - Journal of Financial Economics
M1 - 103854
ER -