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| Enriching the Low-Incomes and Expanding the Middle-Class: The Role of Financial Inclusion in Pro-Poor Growth |
| ZHANG Longyao, LI Yuan, GAO Dongxi
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| College of Finance, Nanjing Agricultural University School of Economic, Jiaxing University |
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Abstract Based on theoretical analysis, this paper empirically tests whether financial inclusion can realize pro-poor growth by constructing a household-level Financial Inclusion Index using the 2015-2019 CHFS data, and employing a panel quartile model and a regime-varying model. The study finds that: (1) Financial inclusion can help achieve pro-poor growth, as evidenced by the fact that financial inclusion can promote the growth of total income of households, especially low-income households; (2) The sub-income heterogeneity analysis shows that financial inclusion can help achieve pro-poor growth of labor income, but is not conducive to such growth in property or transfer income; (3) The analysis of urban-rural heterogeneity shows that financial inclusion can help both urban and rural households achieve pro-poor growth, helping to narrow the internal income gaps within urban and rural areas; (4) The analysis of heterogeneity in the intensity of financial regulation shows that financial inclusion has a more pronounced role in promoting pro-poor growth in areas with stronger financial regulation, while its effect is limited in areas with weaker financial regulation; (5) The analysis of the mechanism shows that financial inclusion can promote entrepreneurship and labor mobility in households, especially low-income households; (6) The further analysis shows that financial inclusion can have the effect of "enriching the low-incomes and expanding the middle-class" through pro-poor growth.
The marginal contributions of this paper are primarily reflected in the following three aspects:
First, from a perspective standpoint, this paper adopts a pro-poor growth framework and systematically demonstrates—through both theoretical derivation and empirical testing—how financial inclusion directly influences economic opportunities and income growth across different income groups, thereby enhancing the understanding of the mechanisms through which financial inclusion achieves its positive effects.
Second, in terms of content, this paper refines the effects of financial inclusion on income growth across different income subcategories, urban and rural households, and varying levels of financial regulatory intensity. This helps clarify the ongoing debate in the literature concerning the pro-poor and trickle-down effects of financial inclusion, and offers fresh insights into understanding the complexities of financial inclusion within diverse economic contexts and development models. Additionally, it analyzes the mechanisms through which financial inclusion influences pro-poor growth from the perspectives of household entrepreneurship and labor mobility, and further explores its “enriching the low-incomes and strenthening the middle-class” effects, thereby significantly enhancing the practical implications of the findings.
Third, from a methodological perspective, this paper constructs a household-level financial inclusion index, and applies a panel quantile model and a regime-varying model, comparing these with mean estimations. This approach not only avoids the ecological fallacy that may arise in macro-index analysis but also more precisely captures the impact differences of financial inclusion on households at varying income levels, providing a clear illustration of how financial inclusion influences pro-poor growth.
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Received: 17 October 2023
Published: 14 August 2025
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