Financial inclusion and women’s bargaining power: evidence from India

ABSTRACT

Extant literature links the higher bargaining power of women with favorable outcomes for the health and education of children, lower domestic abuse, and enhanced socioeconomic status. This paper examines the interplay between the financial inclusion of a woman and her intra-household bargaining power. The theoretical model predicts an ambiguous effect, wherein improvements in her well-being depend on her husband’s reaction. Using household-level data from India, we show that a woman’s well-being improves in many ways when she has a bank account. We use two unique instruments to address the issue of simultaneity. Placebo tests also certify our results. Our findings suggest that removing financial barriers for women increases their independence and say in household decision-making.

KEYWORDS:

• Financial inclusion
• Bargaining Power
• Household decision-making

JEL CLASSIFICATION:

• Codes: D1
• J12
• J16

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Depending upon the benefits that he may derive from his wife’s empowerment, there is a possibility that the husband’s utility may increase beyond $U_h$.

2. The 1994 United Nations General Assembly Resolution defined the multitude of domestic violence against women as ‘Any act of gender-based violence that results in, or is likely to result in physical, sexual, or psychological harm or suffering to women, including threats of such acts, coercion or arbitrary deprivation of liberty, whether occurring in public or private life.’ (United Nations General Assembly, 1994)

3. More detailed information, such as the type of bank account she has, the amount in the account, and the frequency of transactions she does, would have been even better for our analysis of financial inclusion. Unfortunately, DHS does not collect such granular data.