Financial Inclusion and Income Inequality in Mexican Municipalities

Abstract

The Greenwood and Jovanovic (1990) [1], hypothesis, about the influence of the financial inclusion on the inequality in the income distribution, is tested for the Mexican municipalities. The results of the econometric estimation, confirm the theoretical expectative, indicating that a higher financial inclusion would lead initially to a greater income inequality within the Mexican municipalities , so that later on as the inclusion continues growing that inequality reduces. These findings, obtained through the use of regional information for a same country, are the first of its kind on available literature; and suggest the need for more regional approaches, rather than national, in the public policy on the complex social problem of income inequality.