Financial Outreach and Working Poverty in Developing Countries
Although a growing body of literature emphasizes that the poor may benefit from better access to financial services through more growth and employment opportunities, there is a continuing debate about the mechanism and extent to which such access would reduce inequalities. Considering that labor is the main asset of the poor, this paper investigates the impact of access to financial services, measured by the number of bank branches, on working poverty and inequality in the labor market. The study uses a panel of 63 developing countries over 2004-13 to demonstrate that improving financial access reduces the proportion of poor workers, especially in countries hit by macroeconomic instability. The analysis shows that the negative impact on working poverty is two times less important than the positive impact on workers at the top of the income distribution, suggesting an increase in inequality. But this effect is mitigated, since the study finds evidence that providing greater access to financial services for relatively rich workers can have a strong effect on decreasing working poverty.
| Main Authors: | , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018-12
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| Subjects: | FINANCIAL INCLUSION, BANK PENETRATION, WORKING POVERTY, ACCESS TO FINANCE, FINANCIAL SERVICES, POVERTY LINE, HOUSEHOLD SURVEY, EMPLOYMENT, WORKING POOR, INEQUALITY, INCOME DISTRIBUTION, |
| Online Access: | http://documents.worldbank.org/curated/en/547731545403972846/Financial-Outreach-and-Working-Poverty-in-Developing-Countries-New-Evidence-from-Bank-Penetration https://hdl.handle.net/10986/31088 |
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| Summary: | Although a growing body of literature
emphasizes that the poor may benefit from better access to
financial services through more growth and employment
opportunities, there is a continuing debate about the
mechanism and extent to which such access would reduce
inequalities. Considering that labor is the main asset of
the poor, this paper investigates the impact of access to
financial services, measured by the number of bank branches,
on working poverty and inequality in the labor market. The
study uses a panel of 63 developing countries over 2004-13
to demonstrate that improving financial access reduces the
proportion of poor workers, especially in countries hit by
macroeconomic instability. The analysis shows that the
negative impact on working poverty is two times less
important than the positive impact on workers at the top of
the income distribution, suggesting an increase in
inequality. But this effect is mitigated, since the study
finds evidence that providing greater access to financial
services for relatively rich workers can have a strong
effect on decreasing working poverty. |
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