Financial exclusion in the USA: Looking beyond demographics

We investigate the linkages between cultural factors and financial exclusion using detailed data from the 2013 wave of the Panel Study of Income Dynamics (PSID). Controlling for a large number of demographic characteristics and background factors, we find that Catholics are more likely to be excluded from basic banking services. In contrast, Jewish and religiously unaffiliated individuals are more likely to participate in retirement plans and the stock market. More importantly, we obtain economically important effects of social participation on financial exclusion. In particular, we document that individuals exhibiting a pro-social religious behavior, proxied by charitable giving, are less likely to be financially excluded. This effect remains robust to the use of earlier waves of the PSID, as well as to alternative estimation techniques which account for endogeneity of charitable giving and unobserved households’ heterogeneity. Our findings highlight the need for the development of initiatives which promote social participation as a means of combating financial exclusion.