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Financial Inclusion and Poverty Transitions: An Empirical Analysis for Italy

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Abstract

We estimate the causal effect of financial inclusion on transition probabilities into and out of poverty. By exploiting a longitudinal sample from the Bank of Italy's Survey on Household Income and Wealth between 2002 and 2016, we find that financial inclusion is effective in both reducing the likelihood of falling into poverty and helping the poor to improve their economic condition and climb out of poverty. According to our baseline estimates, access to a deposit account actually reduces the risk of falling below the poverty line by 3 percentage points and increases the chance of exiting poverty by 5 percentage points. The significance and magnitude of such effects are also confirmed when considering alternative proxies for financial inclusion (availability of debit/credit/pre-paid cards, use of remote banking services) and are robust to alternative empirical strategies (bivariate model with overidentifying restrictions) and to misspecification problems related to omitted factors, such as the level of household indebtedness.

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  • Giulia Bettin & Claudia Pigini & Alberto Zazzaro, 2020. "Financial Inclusion and Poverty Transitions: An Empirical Analysis for Italy," CSEF Working Papers 577, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:577
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    Keywords

    Employment; relationship banking; insurance;
    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
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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