Financial inclusion transitions in Peru: does labor informality play a role?

Jose Aurazo and Farid Gasmi

No 1200, BIS Working Papers from Bank for International Settlements

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.

Keywords: financial inclusion; labor informality; transition probabilities; dynamic random-effect panel probit (search for similar items in EconPapers)
JEL-codes: C23 D14 E26 I31 O17 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-ban, nep-dev, nep-fdg, nep-fle, nep-iue and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bis.org/publ/work1200.pdf Full PDF document (application/pdf)
https://www.bis.org/publ/work1200.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:1200

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().