Financial inclusion and poverty transitions: an empirical analysis for Italy

We estimate the causal e ect 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 andWealth between 2002 and 2016, we find that financial inclusion is effective in both reducing the likelihood of falling into poverty and helping poor people to improve economic conditions and get out of their poverty status. According to our baseline estimates, the 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 the magnitude of such effects are confirmed also 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 misspeci cation problems related to omitted factors, such as the level of household indebtedness.