Local Financial Development and Household Welfare : Microevidence from Thai Households

We provide new micro evidence on the relationship between financial development and welfare. Relying on the concept of local financial development, our analysis focuses on two dimensions of household welfare: investment and consumption. The results show that financial development is associated with a larger volume of productive investments and is also able to improve the financing of consumption, however the effect of financial development on credit as an instrument to insure consumption risk is not supported. This finding implies that consumption smoothing is only weakly improved by larger financial development