Template-Type: ReDIF-Paper 1.0
Author-Name: Jose Aurazo 
Author-X-Name-First: Jose
Author-X-Name-Last: Aurazo
Author-Name: Farid Gasmi
Author-X-Name-First: Farid
Author-X-Name-Last: Gasmi
Title: Financial inclusion transitions in Peru: does labor informality play a role?
Abstract: Low financial inclusion and high labor informality are two major challenges in developing countries. Using Peruvian survey data from 2015-18, we explore the dynamic relationship between these two variables by examining how labor informality and movements between formal and informal jobs may affect the transition probabilities of financial inclusion. First, we find that becoming informally employed reduces the probability of entering the formal financial system by 8 percentage points (pp) and increases the likelihood of exiting from it by 9.3 pp. Relative to persistently informal workers, those who stay in formal jobs have a 9 pp higher probability of gaining access to bank accounts, and 12 pp lower probability of losing access. Workers who move into formal jobs are more likely to enter the formal financial system by 9.7 pp and less likely to exit from it by 7.1 pp. These results underscore the complementarity of formalizing the informal sector and expanding access to financial services.
Creation-Date: 2024-07
File-URL: https://www.bis.org/publ/work1200.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1200.htm
File-Format: text/html
Number: 1200
Keywords: financial inclusion, labor informality, transition probabilities, dynamic random-effect panel probit
Classification-JEL: C23, D14, E26, I31, O17  
Handle: RePEc:bis:biswps:1200