Template-Type: ReDIF-Paper 1.0
Author-Name: Ana Aguilar
Author-X-Name-First: Ana
Author-X-Name-Last: Aguilar
Author-Name: Jon Frost
Author-X-Name-First: Jon
Author-X-Name-Last: Frost
Author-Name: Rafael Guerra
Author-X-Name-First: Rafael
Author-X-Name-Last: Guerra
Author-Name:Steven Kamin
Author-X-Name-First: Steven
Author-X-Name-Last: Kamin
Author-Name:Alexandre Tombini
Author-X-Name-First: Alexandre
Author-X-Name-Last: Tombini
Title: Digital payments, informality and economic growth
Abstract: We examine the relationship between digital payment innovation, economic growth and informal activities in 101 economies over 2014–19. Following the economic growth literature, panel regressions relate growth rates of GDP per capita, total factor productivity (TFP) and the share of informal sector employment to lagged levels of these variables, the extent of digital payments use and various controls for endogeneity. We find that a one-percentage point increase in digital payments use is associated with increases in the growth of GDP per capita of 0.10 percentage points over a two-year period, and a decline in the share of informal sector employment of 0.06 percentage points over a two-year period. Insofar as the reported share of the population making digital payments ranges nearly from 0 to 100 percent, this is substantial. Digital payments do not appear to be significantly associated with rises in TFP, once controlling for general measures of digitalisation and government effectiveness, but they are linked to greater financial inclusion and credit access. Our results reinforce the case for government policies to encourage digital payments and, as complementary factors, access to the financial sector and information technology. 
Creation-Date: 2024-07
File-URL: https://www.bis.org/publ/work1196.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1196.htm
File-Format: text/html
Number: 1196
Keywords:digital innovation, informal economy, productivity, economic growth
Classification-JEL: G21, G23, O32
Handle: RePEc:bis:biswps:1196