Financial Inclusion and Income Inequality: Does Financial Structure Matter? University of Indonesia
Article Sidebar
Accepted
28 December 2021
Published
1 July 2021
Keywords:
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financial inclusion, income inequality, financial structure, panel data regression
Abstract
There are current debates regarding the effect of financial inclusion on income inequality. The effect of financial inclusion on income inequality might be conditional to several other factors. This study aims to investigate the effect of financial inclusion on income inequality conditional to financial structure. This research used Indonesia’s 33 provinces yearly data from 2010 to 2020. Analysis method that was used in this study was static panel data model. The result showed that financial inclusion and financial structure does not significantly affect income inequality. However, for provinces with high HDI, financial inclusion and financial structure demonstrate significant and negative effect on income inequality. Policies on financial inclusion to solve the problem of income inequality needs to consider characteristic of each region, especially human resource quality.
References
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Bangoura, L., Momar Khary Mbow, A. L., & Diaw, D. (2016). Impact of Microfinance on Poverty and Inequality: A Heterogeneous Panel Causality Analysis. Review of Economics and Politics, 126, 789-818.
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Camara, N., & Tuesta, D. (2014). Measuring Financial Inclusion Index. Working Paper BBVA Research , 1-41.
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Dhrifi, A. (2013). Financial Development and Poverty: What Role for Growth and Inequality? International Journal of Academic Research in Accounting, Finance and Management Science, 119-129.
Erlando, A., Riyanto, F. D., & Masakazu, S. (2020). Financial Inclusion, economic growth, and poverty alleviation: evidence from eastern Indonesia. Heliyon, 6(10).
Fouejieu, A., Sahay, R., Cihak, M., & Chen, S. (2020). Financial Inclusion and inequality: A cross country analysis. The Journal of International Trade & Economic Development.
Ghosh, J. (2013). Microfinance and the challenge of financial inclusion for development. Cambridge Journal of Economics, 1203-1219.
Hanivan, H., & Nasrudin, N. (2019). A Financial Inclusion Index for Indonesia. Bulletin of Monetary Economics and Banking, 22(3), 351-366.
Honohan, P. (2008). Cross-country variation in household access to financial services. Journal of Banking and Finance, 2493-2500.
Jauch, S., & Watzka, S. (2016). Financial Development and Income Inequality: A Panel Data Approach. Empirical Economics, 291-314.
Kendall, J., Mylenko, N., & Ponce, A. (2010). Measuring Financial Access around the World. Policy Research Working Paper, 1-67.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 1-28.
Le, Q. H., Ho, H. L., & Mai, N. C. (2019). The impact of financial inclusion on income inequality in transition economies. Management Science Letters, 661-672.
Leuween, B. v., & Foldvari, P. (2016). The Development of Inequality and Poverty in Indonesia. Bulletin of Indonesian Economic Studies, 52(3), 379-402.
Liu, G., & Zhang, C. (2018). Does Financial Structure Matter for Economic Growth in China. China Economic Review. doi:10.1016/j.chieco.2018.06.006
Malerba, G., & Spreafico, M. (2014). Structural Determinants of Income Inequality in the European Union: Evidence from a Panel Analysis. Rivista Internazionale Di Scienze Sociali, 122(1), 37-83.
Mushtaq, R., & Bruneau, C. (2019). Microfinance, Financial Inclusion and ICT: Implications for Poverty and Inequality. Technology in Society(59), 101-154. doi:10.1016/j.techsoc.2019.101154
OECD. (2007). The Financial Sector's Contribution to Pro-Poor Growth . In OECD, Promoting Pro-Poor Growth. Paris: OECD Publishing.
Park, C.-Y., & Mercado, R. V. (2015, January). Financial Inclusion, Poverty, and Income Inequality in Developing Asia. ADB Economics Working Paper Series.
Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
Prasetyo, B. A., Priyarsono, D. S., & Mulatsih, S. (2013). Infrastructure, Economic growth and Inequality in Indonesia Land Borders. Economic Journal of Emerging Markets, 5(2), 99-108.
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Refqi, M., & Hidayat, A. K. (2019). Determinants of Regional Disparities in Indonesia: Lesson from Provincial Level. Working Paper in Economics and Development Studies Padjadjaran University, 1-24.
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Sarma, M. (2015). Measuring Financial Inclusion. Economics Bulletin, 35(1), 604-611.
Sarma, M., & Pais, J. (2011). Financial Inclusion and Development. Journal of International Development, 23(5).
Sen, A. (2009). The Idea of Justice. Massachusetts: The Belknap Press of Harvard University Press.
Silva, I. D., & Sumarto, S. (2014). Does Economic Growth Really Benefit the Poor? Income Distribution Dynamics and Pro-Poor Growth in Indonesia. Bulletin of Indonesian Economic Studies, 50(2), 227-42.
SNKI. (2018). Financial Inclusion Insights Indonesia 2018. Jakarta: Kemenko Perekonomian RI.
Soetiono, K. S., & Setiawan, C. (2018). Literasi dan Inklusi Keuangan Indonesia. Depok: Rajawali Press.
Suryahadi, A., Suryadarma, D., & Sumarto, S. (2006). Economic growth and poverty reduction in Indonesia: The effect of location and sectoral components of growth. SMERU Working Paper, 1-33.
Tang, X., & Yao, X. (2018). Do Financial Structures Affect Exchange Rate and Stock Price Interaction? Evidence from Emerging Markets. Emerging Markets Review, 43, 64-76. doi:10.1016/j.ememar.2017.10.004
Todaro, M. P., & Smith, S. C. (2012). Economic Development 11th Edition. Boston: Person.
Tridico, P. (2017). The determinants of income inequality in OECD countries. Cambridge Journal of Economics, 1-34. doi:10.1093/cje/bex069
Ummah, B. B., Nuryartono, N., & Anggraeni, L. (2015). Analisis Inklusi Keuangan dan Pemerataan Pendapatan di Indonesia. Jurnal Ekonomi dan Kebijakan Pembangunan, 4(1), 1-27.
Wang, X., & Guan, J. (2017). Financial inclusion: measurement, spatial effects and influencing factors . Applied Economics, 1751-1762.
World Bank. (2019, November 2). Financial Inclusion. Retrieved from The World Bank Official Website: https://www.worldbank.org/en/topic/financialinclusion/overview#1
Akbar, M. (2018). Regional Openness and Regional Inequality. Master Theses Department of Economics University of Indonesia, 1-87.
Allen, M. (2017). Variables, Moderating Types. Sage Publishing.
Bangoura, L., Momar Khary Mbow, A. L., & Diaw, D. (2016). Impact of Microfinance on Poverty and Inequality: A Heterogeneous Panel Causality Analysis. Review of Economics and Politics, 126, 789-818.
Beck, T. (2006). Creating an Efficient Financial System: Challenges in a Global Economy. World Bank Policy Research Working Paper, 1-43.
Camara, N., & Tuesta, D. (2014). Measuring Financial Inclusion Index. Working Paper BBVA Research , 1-41.
Chrisyanto, C. (2006). Faktor-faktor yang Mempengaruhi Ketimpangan Perekonomian Antar Daerah di Indonesia. Tesis Magister Perencanaan dan Kebijakan Publik Fakultas Ekonomi Universitas Indonesia, 1-106.
Desfiandi, A. (2014). Social Security Spending and Income Inequality in Indonesia. Master Thesis Department of Economics University of Indonesia, 1-39.
Deyshappriya, N. P. (2017). Impact of Macroeconomic factors on income inequality and income distribution in Asian countries. Asian Development Bank Working Paper, 1-21.
Dhrifi, A. (2013). Financial Development and Poverty: What Role for Growth and Inequality? International Journal of Academic Research in Accounting, Finance and Management Science, 119-129.
Erlando, A., Riyanto, F. D., & Masakazu, S. (2020). Financial Inclusion, economic growth, and poverty alleviation: evidence from eastern Indonesia. Heliyon, 6(10).
Fouejieu, A., Sahay, R., Cihak, M., & Chen, S. (2020). Financial Inclusion and inequality: A cross country analysis. The Journal of International Trade & Economic Development.
Ghosh, J. (2013). Microfinance and the challenge of financial inclusion for development. Cambridge Journal of Economics, 1203-1219.
Hanivan, H., & Nasrudin, N. (2019). A Financial Inclusion Index for Indonesia. Bulletin of Monetary Economics and Banking, 22(3), 351-366.
Honohan, P. (2008). Cross-country variation in household access to financial services. Journal of Banking and Finance, 2493-2500.
Jauch, S., & Watzka, S. (2016). Financial Development and Income Inequality: A Panel Data Approach. Empirical Economics, 291-314.
Kendall, J., Mylenko, N., & Ponce, A. (2010). Measuring Financial Access around the World. Policy Research Working Paper, 1-67.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 1-28.
Le, Q. H., Ho, H. L., & Mai, N. C. (2019). The impact of financial inclusion on income inequality in transition economies. Management Science Letters, 661-672.
Leuween, B. v., & Foldvari, P. (2016). The Development of Inequality and Poverty in Indonesia. Bulletin of Indonesian Economic Studies, 52(3), 379-402.
Liu, G., & Zhang, C. (2018). Does Financial Structure Matter for Economic Growth in China. China Economic Review. doi:10.1016/j.chieco.2018.06.006
Malerba, G., & Spreafico, M. (2014). Structural Determinants of Income Inequality in the European Union: Evidence from a Panel Analysis. Rivista Internazionale Di Scienze Sociali, 122(1), 37-83.
Mushtaq, R., & Bruneau, C. (2019). Microfinance, Financial Inclusion and ICT: Implications for Poverty and Inequality. Technology in Society(59), 101-154. doi:10.1016/j.techsoc.2019.101154
OECD. (2007). The Financial Sector's Contribution to Pro-Poor Growth . In OECD, Promoting Pro-Poor Growth. Paris: OECD Publishing.
Park, C.-Y., & Mercado, R. V. (2015, January). Financial Inclusion, Poverty, and Income Inequality in Developing Asia. ADB Economics Working Paper Series.
Piketty, T. (2014). Capital in the Twenty-First Century. Harvard University Press.
Prasetyo, B. A., Priyarsono, D. S., & Mulatsih, S. (2013). Infrastructure, Economic growth and Inequality in Indonesia Land Borders. Economic Journal of Emerging Markets, 5(2), 99-108.
Ray, D. (1998). Development Economics. West Sussex: Princeton University Press.
Refqi, M., & Hidayat, A. K. (2019). Determinants of Regional Disparities in Indonesia: Lesson from Provincial Level. Working Paper in Economics and Development Studies Padjadjaran University, 1-24.
Sarma, M. (2008). Index of Financial Inclusion. ICRIER Working Papers No. 125.
Sarma, M. (2015). Measuring Financial Inclusion. Economics Bulletin, 35(1), 604-611.
Sarma, M., & Pais, J. (2011). Financial Inclusion and Development. Journal of International Development, 23(5).
Sen, A. (2009). The Idea of Justice. Massachusetts: The Belknap Press of Harvard University Press.
Silva, I. D., & Sumarto, S. (2014). Does Economic Growth Really Benefit the Poor? Income Distribution Dynamics and Pro-Poor Growth in Indonesia. Bulletin of Indonesian Economic Studies, 50(2), 227-42.
SNKI. (2018). Financial Inclusion Insights Indonesia 2018. Jakarta: Kemenko Perekonomian RI.
Soetiono, K. S., & Setiawan, C. (2018). Literasi dan Inklusi Keuangan Indonesia. Depok: Rajawali Press.
Suryahadi, A., Suryadarma, D., & Sumarto, S. (2006). Economic growth and poverty reduction in Indonesia: The effect of location and sectoral components of growth. SMERU Working Paper, 1-33.
Tang, X., & Yao, X. (2018). Do Financial Structures Affect Exchange Rate and Stock Price Interaction? Evidence from Emerging Markets. Emerging Markets Review, 43, 64-76. doi:10.1016/j.ememar.2017.10.004
Todaro, M. P., & Smith, S. C. (2012). Economic Development 11th Edition. Boston: Person.
Tridico, P. (2017). The determinants of income inequality in OECD countries. Cambridge Journal of Economics, 1-34. doi:10.1093/cje/bex069
Ummah, B. B., Nuryartono, N., & Anggraeni, L. (2015). Analisis Inklusi Keuangan dan Pemerataan Pendapatan di Indonesia. Jurnal Ekonomi dan Kebijakan Pembangunan, 4(1), 1-27.
Wang, X., & Guan, J. (2017). Financial inclusion: measurement, spatial effects and influencing factors . Applied Economics, 1751-1762.
World Bank. (2019, November 2). Financial Inclusion. Retrieved from The World Bank Official Website: https://www.worldbank.org/en/topic/financialinclusion/overview#1
Authors
Zulfa SariI., & FaliantyT. A. (2021). Financial Inclusion and Income Inequality: Does Financial Structure Matter? University of Indonesia. JURNAL EKONOMI DAN KEBIJAKAN PEMBANGUNAN, 10(1), 72-100. https://doi.org/10.29244/jekp.10.1.2021.72-100
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