The World Bank Economic Review Advance Access originally published online on November 20, 2008
The World Bank Economic Review 2008 22(3):431-455; doi:10.1093/wber/lhn019
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What Can We Learn about Financial Access from U.S. Immigrants? The Role of Country of Origin Institutions and Immigrant Beliefs
Una Okonkwo Osili is an associate professor of economics at Indiana University–Purdue University Indianapolis; her email address is uosili{at}iupui.edu
Anna Paulson (corresponding author) is a senior financial economist at the Federal Reserve Bank of Chicago
Correspondence: her email address is anna.paulson{at}chi.frb.org
JEL codes: O16, J61, G11
Immigrants from countries with more effective institutions are more likely than other immigrants to have a relationship with a bank and to use formal financial markets more extensively. The evidence that a country's institutional environment shapes beliefs—and by extension the use of financial services—provides support for policies that focus on institutional reforms in promoting financial access. After holding wealth, education, and other factors constant, the impact of institutional quality in the country of origin affects the financial market participation of all immigrant groups except those who have lived in the United States for more than 28 years. These findings are robust to alternative measures of institutional effectiveness, to controlling for additional country of origin characteristics, and to various methods for addressing potential biases caused by immigrant self-selection.