The document examines the effect of bank credit on employment formalization in Uruguay. This being said, the authors claim that financial deepening decreases informality, especially in more financially dependent sectors. Furthermore, the document highlights that credit has a larger impact on the employment formalization of determined social groups such as women and younger workers. In order to assess these claims, the authors introduce a difference-in-differences methodology proposed by Catão, Pagés and Rosales (2011).
The paper is organized as follows. After a brief introduction, section two defines the main variables used in the analysis as well as the data sources introduced by the authors. Meanwhile, chapter three discusses recent developments in the Uruguayan economy regarding the variables of interest. For its part, section four presents the methodological approach used by the authors and discusses the results obtained. Finally, chapter five offers some concluding arguments on the subject.
To conclude, the authors claim that despite the severe economic crisis and a sharp contraction of bank credit experienced by the Uruguayan economy, the investigation provided no relevant evidence that suggests the effects of bank credit on employment formality has changed over time.