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Individualism and financial inclusion

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  • Lu, Weijie
  • Niu, Geng
  • Zhou, Yang

Abstract

Culture affects human behavior in subtle but profound ways. This paper investigates the effects of individualism, one of the most salient cultural dimensions, on household financial inclusion. We first conduct a cross-country analysis and then use an epidemiological approach, involving second-generation U.S. immigrants of different origins, to establish causality. We find that individualism has a strong positive effect on household access to and usage of various offline and online financial services. This cultural effect is more pronounced for individuals with lower socioeconomic status. Furthermore, we show that individualism alleviates mistrust in financial institutions and reduces the reliance on informal networks as sources of financing. These findings suggest that a high level of trust and a weak informal support network may serve as the underlying mechanisms. Our results are robust to a variety of robustness checks.

Suggested Citation

  • Lu, Weijie & Niu, Geng & Zhou, Yang, 2021. "Individualism and financial inclusion," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 268-288.
  • Handle: RePEc:eee:jeborg:v:183:y:2021:i:c:p:268-288
    DOI: 10.1016/j.jebo.2021.01.008
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    2. Idrees Liaqat & Yongqiang Gao & Faheem Ur Rehman & Zoltán Lakner & Judit Oláh, 2022. "National Culture and Financial Inclusion: Evidence from Belt and Road Economies," Sustainability, MDPI, vol. 14(6), pages 1-21, March.
    3. Dar, Shafkat Shafi & Sahu, Sohini, 2022. "The effect of language on financial inclusion," Economic Modelling, Elsevier, vol. 106(C).
    4. de Jong, Abe & Shahriar, Abu Zafar & Shazia, Farhan, 2022. "Reaching out to the unbanked: The role of political ideology in financial inclusion," Journal of International Money and Finance, Elsevier, vol. 126(C).
    5. Francis OSEI-TUTU & Laurent WEILL, 2022. "Individualism Reduces Borrower Discouragement," Working Papers of LaRGE Research Center 2022-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

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    More about this item

    Keywords

    Individualism; Financial inclusion; Digital finance; Mistrust in financial institutions; Epidemiological approach;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N2 - Economic History - - Financial Markets and Institutions
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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