Importance of Access to Finance in Reducing Income Inequality and Poverty Level

This study investigates the relationship between access to finance, and poverty and income inequality. We first define access to finance and identify various measurements of access to finance. Next, we examine previous analyses on the impacts of access to finance. Finally, using state-level panel data of the United States, fixed effect estimation is conducted to analyze the impact of access to finance on income inequality and poverty level. Our analysis is the first study to utilize state-level data on access to finance. The results show that access to finance has positive effects in reducing income inequality and the poverty ratio.