Institutional Quality, Financial Inclusion and Income Inequality: A study of Selected Asian Countries

Abstract

Focusing on selected Asian countries offers a regional perspective on income inequality dynamics, contributing to a better understanding of the factors driving income disparities in diverse socio-economic contexts. Income inequality is a pervasive and pressing issue in many Asian countries, posing significant challenges to inclusive economic growth, social cohesion, and sustainable development. Despite efforts to address income disparities through various policy interventions, the factors contributing to lessening income inequality remain poorly understood, particularly in the context of institutional quality and financial inclusion. Therefore, there is a need for empirical research to examine the role of institutional quality and financial inclusion in mitigating income inequality across selected Asian countries. This study has investigated the impact of financial inclusion with institutional quality, economic growth, and foreign direct investment on income inequality in Asian emerging economies. The authors have used data from 2012 to 2020 to check the relationship between dependent and independent variables. We have used the Gini index as a dependent variable and financial inclusion, institutional quality, GDP per capita, and foreign direct investment are taken as independent variables. GMM results show that financial inclusion and institutional quality are contributing towards lessening poverty in these economies. Moreover, foreign direct investment and GDP per capita also decrease the income disparity of these nations. It is suggested for better financial services provision and a stable environment for high growth and foreign direct investment.