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Economic uncertainty, financial inclusion, and income inequality in developing countries: Evidence from a dynamic panel threshold analysis

Year: 2025

Type: article

Abstract: This study investigates how financial inclusion moderates the impact of economic uncertainty on income inequality in 58 developing countries from 2004 to 2022. Using an endogenous dynamic panel threshold model, the findings reveal a threshold effect: economic uncertainty reduces income inequality only when financial inclusion surpasses a certain level. Below this threshold, uncertainty worsens inequality. Financial inclusion reduces income inequality where the effect is pronounced after exceeding the threshold. These results underscore that the relationship between economic uncertainty and income inequality is conditional on financial inclusion. The study emphasizes that enhancing financial inclusion is essential for shielding vulnerable economies from the inequality-amplifying effects of uncertainty, and that this relationship holds under various income inequality, financial inclusion measures and estimation techniques.

Source: Borsa Istanbul Review

DOI: 10.1016/j.bir.2025.11.002

Authors: Siong Hook Law, Mohamad Fazli Sabri, Sylviana Maya Damayanti, Irwan Trinugroho, Arinda Mentari Putri

Institutions: Universiti Putra Malaysia, Bandung Institute of Technology, Sebelas Maret University

Language: English

Topic: Income, Poverty, and Inequality

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth, No poverty

Open Access status: gold

Estimated APC paid: $1,500