Impact of finance and digital infrastructure on poverty and income inequality

Abstract

This study aims to investigate the effects of financial expansion and digital infrastructure development on poverty and income inequality in East Asia and Southeast Asia. Using panel data from 16 countries spanning the period from 1998 to 2023, the study employs the Pooled OLS method to examine the overall average relationship. The research findings indicate that the Financial Inclusion Index (FII) has a positive impact on income inequality (GINI) and the poverty rate (POV), but a negative impact on the average income shortfall (POVH). The number of Fixed Broadband Subscriptions (FBS) and the proportion of individuals using the Internet (IUI) hurt POV, while FBS has a positive effect and IUI hurts POVH. Mobile Cellular Subscriptions (MCS) have a positive effect on POV but an adverse effect on POVH, and no significant impact on GINI. Accordingly, the study emphasizes the importance of promoting inclusive finance, investing in digital infrastructure, and formulating appropriate support policies to optimize the impact of digital technology on poverty reduction and income inequality.