Abstract：

This paper gauges the relationship between financial depth and outreach and informality using firm- and household-survey from India. We distinguish between three channels through which financial development can reduce informality: notably, reducing the entry barrier to the formal sector, increasing productivity of formal firms, and reallocating informal business owners to salaried jobs in formal firms. We find that financial outreach, as gauged by branch penetration, has a stronger effect on reducing the incidence of informality by reducing barriers to the formal economy, especially for smaller firms. In comparison, financial depth, as measured by credit to SDP, increases the productivity of formal sector firms and facilitates a transition of informal business owners into salaried jobs in the formal sector.

Speaker：

Thorsten Beck is professor of banking and finance at Cass Business School in London. He is also a research fellow of the Centre for Economic Policy Research (CEPR) and the CESifo. He was professor of economics from 2008 to 2014 at Tilburg University and the founding chair of the European Banking Center  from 2008 to 2013. Previously he worked in the research department of the World Bank and has also worked as consultant for – among others -  the European Central Bank, the Bank of England, the BIS, the IMF, the European Commission, and the German Development Corporation. His research, academic publications and operational work have focused on two major questions: What is the relationship between finance and economic development? What policies are needed to build a sound and effective financial system? Recently, he has concentrated on access to financial services, including SME finance, as well as on the design of regulatory and bank resolution frameworks. In addition to numerous academic publications in leading economics andfinance journals, he has co-authored several policy reports on access to finance, financial systems in Africa and cross-border banking. His country experience, both in operational and research work, includes Bangladesh, Bolivia, Brazil, China, Colombia, Egypt, Mexico, Russia and several countries in Sub-Saharan Africa. In addition to presentation at numerous academic conferences, including several keynote addresses, he is invited regularly to policy panels across Europe. He holds a PhD from the University of Virginia and an MA from the University of Tübingen in Germany.