Aurazo, Jose and Gasmi, Farid (2022) Labor informality and financial inclusion transitions : evidence from Peru. TSE Working Paper, n. 22-1349, Toulouse.

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Considered as a cornerstone of development, financial inclusion has become a universal goal, in particular for developing countries that happen to be characterized by a high degree of labor informality. Our aim in this paper is twofold. First, we study how labor informality
affects financial inclusion in a static framework. Second, we argue that financial inclusion must be treated as a dynamic process and investigate the effect of movements between formal and informal jobs on the probabilities of entry to and exit from the financial system. We
find evidence that financial inclusion is an auto-regressive process and that labor informality reduces the probability of entry to the financial system by 8% whereas it increases the probability of exit from it by 9.3%. As to transitions in the labor market, we find that,
relative to workers who get stuck in informal jobs, for those who have and stay with formal jobs, the probability that they enter the financial system is higher by 9% and the probability that they exit from it is lower by 12%. As to the workers who move into labor formality,
we find that they are more likely to enter the financial system by 9.7% and less likely to exit from it by 7.1%. Our results add to the many well documented spillover effects of labor formality in developing countries to encourage policies that promote it.

Item Type: Monograph (Working Paper)
Language: English
Date: July 2022
Place of Publication: Toulouse.
Uncontrolled Keywords: Financial inclusion, labor informality, transition probabilities, dynamic randomeffect panel probit
JEL Classification: C23 - Models with Panel Data
D14 - Personal Finance
E26 - Informal Economy; Underground Economy
I31 - General Welfare; Basic Needs; Living Standards; Quality of Life; Happiness
O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements - Legal, Social, Economic, and Political
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 30 Aug 2022 12:55
Last Modified: 01 Sep 2022 07:48
OAI Identifier:
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