Access to Banking and the Role of Inequality and the Financial Crisis

Mauro Caselli and Babak Somekh

The B.E. Journal of Economic Analysis & Policy, 2021, vol. 21, issue 4, 1373-1410

Abstract: We study access to banking and how it is related to banks’ rate of return on investments and the distribution of income. We develop our empirical framework through a theoretical supply-side model of bank deposit services with a consumer population heterogeneous in income. We use this model to show how decreases in the interest rate margin and higher income disparities lead to an increase in the proportion of unbanked. Using localized US household data from 2009, 2011, 2013 and 2015 we find strong empirical evidence for the predictions of the model. We then structurally estimate our model to estimate the value of having a checking account relative to alternative financial services and to quantify the effects of actual changes in the interest rate margin and the distribution of income that occurred in the aftermath of the 2008 financial crisis.

Keywords: financial exclusion; income inequality; financial crisis; alternative financial services (search for similar items in EconPapers)
JEL-codes: D11 D12 D14 D21 D22 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Working Paper: Access to Banking and the Role of Inequality and the Financial Crisis (2019)
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DOI: 10.1515/bejeap-2020-0421

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