Table 8 shows the results of the TSLS estimate.
When the forty countries are taken as a group, financial inclusion improves the relationship
between income inequality and economic growth. When we classify the forty countries into highincome
and low-income countries, we find that such a trend is seen more in low-income countries than
in high-income countries and is much stronger in high-fragility countries than in low-fragility
countries.
An even more meaningful interpretation can be seen by comparing the results of these estimates
with those in Table 2. In the case of the forty countries, the negative effect of income inequality on
economic growth turns positive, and this trend is strong in both low-income countries and highfragility
countries. The reduction in income inequality through financial inclusion changes the negative
relationship between income inequality and economic growth into a positive relationship.
When we consider the typical negative relationship between these two variables, we find that such
changes come mainly from the strong positive effect of financial inclusion on economic growth, in
particular in the countries that have relatively low economic capacity and a weak financial system.