Closing the income gap: The mediating effect of financial inclusion in the linkage between technological advancement and income inequality in BRICS economies

Abstract

Abstract This study examines the relationship between technological advancement and income inequality in the BRICS countries (Brazil, Russia, India, China, and South Africa) with a particular focus on the mediating role of financial inclusion. Employing statistical techniques such as two-stage least squares regression and principal component analysis, the research analyzes data from reliable sources between 2011 and 2021. The findings indicate a negative relationship between technological progress and income inequality, suggesting that as technology advances, income gaps will narrow slightly. Furthermore, the study reveals a positive relationship between technological advancement and financial inclusion, as well as a negative impact of financial inclusion on income inequality. These results have significant implications for policymakers, emphasizing the importance of promoting financial inclusivity to reduce income inequality in these countries. However, the study also acknowledges certain limitations and suggests future research to consider controlling for other potential factors and conducting longitudinal studies to better understand the dynamic relationship between these variables.