Disentangling vulnerability through consumer behavior: the role of financial health
This paper analyzes the effect of financial participation on consumer's financial vulnerability, which is pervasive in countries in the developing world. We suggest the need to observe the financial behavior of consumers, through financial health, to analyze the effects of such participation ra...
| Authors: | , , |
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| Format: | report |
| Publication Date: | 2019 |
| Country: | España |
| Institution: | Universidad Complutense de Madrid (UCM) |
| Repository: | Docta Complutense |
| Language: | English |
| OAI Identifier: | oai:docta.ucm.es:20.500.14352/107642 |
| Online Access: | https://hdl.handle.net/20.500.14352/107642 |
| Access Level: | Open access |
| Keyword: | 336 312 G51 G53 C31 Financial vulnerability Financial health Resilience Consumers' welfare Financial inclusion Finanzas Econometría (Economía) Dinero 5206.10 Características socioeconómicas 5302.02 Modelos Econométricos 5308.02 Comportamiento del Consumidor |
| Summary: | This paper analyzes the effect of financial participation on consumer's financial vulnerability, which is pervasive in countries in the developing world. We suggest the need to observe the financial behavior of consumers, through financial health, to analyze the effects of such participation rather than taking into account only the narrower concept of financial inclusion. Our hypothesis is that welfare gains are not directly derived from the standalone ownership of bank accounts (i.e. financial inclusion) or having access to credit, but from their appropriate and responsible use. Firstly, we developed a stylized general framework to study the mechanisms and develop a measure to monitor financial health. Secondly, evidence on how participation in the financial system affects vulnerability is shown for five Latin American countries (Bolivia, Chile, Colombia, Ecuador, and Peru). We find that financial health has a higher impact on financial vulnerability than does financial inclusion. Human capital and financial literacy also affect financial vulnerability. The higher the level of these variables, the higher (lower) the probability of being financially safe (vulnerable). The structure of income and the environment in which individuals live affects financial vulnerability as well. |
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