Financial Inclusion in Papua New Guinea

Proposition 1 • For a household that is not FI, the gain to becoming FI (moving from NFI to FI) in any time period is given by = AU In UFI-In UNFI 1 In a (j) ae (1+d) - dj + (1 − j) In (1 + t) > 0 ●Intuition: when a household becomes financially included, t falls to zero, Lemma and HH's terms of trade improve ▸ additional trade with the rest of the economy (first term above) ▸ traded inframarginal units of labor are also earning more, allowing higher consumption (second term above). The intratemporal gains from financial inclusion are decreasing in d, that (j† - jž) < 0 д ad is (AU) 1+d 590 Davies & Nettuno Financial Inclusion in Papua New Guinea August 4, 2022 17/36

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