Novel Ways to Reduce Income Inequality: Financial and Digital Inclusion

Income inequality has been constantly increasing throughout the world in recent times. Countries are implementing novel ways of reducing inequality through financial and digital inclusion. The main challenge lies in the assumption that financial and digital inclusion would automatically reduce income inequality. The effectiveness of these services in reducing income inequality will be significantly hindered if people lack knowledge and skills to use these services effectively. It can be argued that the effect of financial and digital inclusion on income inequality will vary depending on their interaction with education level in a country. When financial and digital inclusion interact with education, it is hypothesized to have significant effect on reducing income inequality. Using fixed effects panel data models, this thesis finds strong interaction effect of financial inclusion and education level, but a weak interaction of digital inclusion and education level.