Financial Outreach and Working Poverty in Developing Countries: New Evidence from Bank Penetration

41 Pages Posted: 26 Dec 2018

See all articles by Aissata Coulibaly

Aissata Coulibaly

Université d'Auvergne - Clermont 1, Centre d'Etudes et de Recherches sur le Developpement International (CERDI), Students; World Bank Group

Urbain Thierry Yogo

University of Yaounde II; The World Bank

Date Written: December 21, 2018

Abstract

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.

Keywords: Inequality, Access to Finance, International Trade and Trade Rules, Labor Markets, Rural Labor Markets, Economic Growth, Industrial Economics, Economic Theory & Research

Suggested Citation

Coulibaly, Aissata and Yogo, Urbain Thierry, Financial Outreach and Working Poverty in Developing Countries: New Evidence from Bank Penetration (December 21, 2018). World Bank Policy Research Working Paper No. 8687, Available at SSRN: https://ssrn.com/abstract=3305435

Aissata Coulibaly (Contact Author)

Université d'Auvergne - Clermont 1, Centre d'Etudes et de Recherches sur le Developpement International (CERDI), Students ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

World Bank Group ( email )

10 Marina Boulevard
Marina Bay Financial Center, Tower 2, #34-02
Singapore, DC 018983
Singapore

Urbain Thierry Yogo

University of Yaounde II ( email )

1365 Yaounde
Yaounde, Center 00237
Cameroon

The World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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