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Financial inclusion transitions in Peru: The role of labor informality

Author

Listed:
  • Aurazo, Jose

    (Banco Central de Reserva del Perú
    Bank for International Settlements)

  • Gasmi, Farid

    (Toulouse School of Economics, Université Toulouse Capitole)

Abstract

Developing countries, typically characterized by a high degree of labor informality (LI), have broadly adopted financial inclusion (FI) as a policy goal. Using 2015-2018 survey data from Peru, we examine how LI affects FI (measured as the access to bank accounts/payment cards) from a dynamic perspective by investigating the relationship between LI and FI transitions. First, we find that LI reduces the probability of entering formal financial system by 8 percentage points (pp) and increases that of exiting it by 9.3 pp. As to transitions in the labor market, we find that relative to workers who get stuck with informal jobs, those who have and stay with formal jobs have a higher probability of gaining access to a bank account/payment card by 9 pp and a lower probability of losing access to these financial products by 12 pp. 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 on the relationship between transitions in the labor and financial markets should help design policies for promoting financial inclusion.

Suggested Citation

  • Aurazo, Jose & Gasmi, Farid, 2023. "Financial inclusion transitions in Peru: The role of labor informality," Working Papers 2023-007, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2023-007
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    File URL: https://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2023/documento-de-trabajo-007-2023.pdf
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    More about this item

    Keywords

    Financial inclusion; labor informality; transition probabilities; dynamic random effect panel probit.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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