City Research Online

Finance, Law and Poverty: Evidence from India

Ayyagari, M., Beck, T. ORCID: 0000-0001-8382-2066 & Hoseini, M. (2019). Finance, Law and Poverty: Evidence from India. Journal of Corporate Finance, 101515. doi: 10.1016/j.jcorpfin.2019.101515


Using state-level data from India over the period 1983 to 2005, this paper shows a strong negative relationship between financial depth (as measured by credit volume) and rural poverty. Instrumental variable regressions suggest that this relationship is robust to endogeneity biases. Furthermore, financial deepening has a bigger impact on rural poverty alleviation than outreach (as measured by branch penetration). We find suggestive evidence that financial deepening reduced poverty rates especially among self-employed in the rural areas and also supported an inter-state migration trend from rural areas into the tertiary sector in urban areas, consistent with financial deepening being driven by credit to the tertiary sector. Our findings suggest that financial deepening contributed to poverty alleviation in rural areas by fostering entrepreneurship and inducing geographic-sectoral migration.

Publication Type: Article
Additional Information: © Elsevier 2019. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
Publisher Keywords: Financial Liberalization, Economic Development, Poverty Alleviation, Entrepreneurship, Migration, India
Subjects: D History General and Old World > DS Asia
H Social Sciences > HG Finance
H Social Sciences > HV Social pathology. Social and public welfare
K Law
Departments: Bayes Business School > Finance
Text - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (1MB) | Preview



Downloads per month over past year

View more statistics

Actions (login required)

Admin Login Admin Login