effect on the use of bank accounts by low income households. Alimukhamedova et al.(2015) look at Uzbekistan analyzing the effect of proximity to a microfinance bank on households’ businesses.

Even if distance does not constitute a barrier to formal savings, poorer households in particular may still face higher costs in terms of information barriers. Guiso and Jappelli (2005) develop a model of financial market participation emphasizing information barriers: Investors can learn about assets from distributors or through social interaction. Distributors inform investors depending on the probability that investors buy the asset and on the cost of information production. Regarding cost of information, Guiso and Jappelli (2005) add that the incentive to advertise decreases if gains from spreading information can be appropriated by competitors, i.e., if product substitutability is high and market power is low.

Bogan (2008) argues that improvements in internet access lowered transaction and information costs for stock market participation – estimating that the increased probability of participation due to overall improvements in internet access was equivalent to $27,000 additional household income. Looking at a longer time horizon, Glaser and Klos (2013) back up this finding by causal evidence employing instrumental variable techniques to address the endogeneity of internet access. In addition, analyzing the channels via which internet access facilitates stock market participation they argue that internet diffusion lowers information costs and helps households to make better financial decisions. They corroborate this finding by showing that internet access interacts with financial literacy. Assuming that early internet adopters tend to have higher financial literacy, providing universal internet access would therefore not be a simple policy solution to promote stock market participation (Glaser and Klos, 2013). Liang and Guo (2015) link the effect of internet usage to the research on social interaction and its informational benefit for households’ financial decisions (Hong et al., 2004) and further back up the finding that internet access mainly has an informational role by showing that it acts as a substitute for social interaction. Deuflhard et al. (2015) show for the Netherlands that financially literate individuals, who use the internet and online accounts achieve higher returns.

In transition economies in particular, non-participation in formal savings may also be driven by lack of trust. Malmendier and Nagel (2011) highlight the importance of past experience of economic crises for households’ financial decisions. Stix (2013) and Brown and Stix (2015) show that memories of previous economic crises during transition have an impact on trust in the financial system and affect the demand for informal versus formal savings as well as the currency of savings. For advanced economies, a growing body of research shows that more trusting individuals and those who trust in the stock market are more likely to participate in the risky assets (Guiso et al., 2008; Georgarakos and Pasini, 2011).

# **3. Data and descriptive evidence**

# **3.1. OeNB Euro Survey**

The main data source for the analysis is the “OeNB Euro Survey” conducted by the Austrian central bank since 2007 on a regular basis as a repeated cross-sectional survey in 10 Central, Eastern and Southeastern European countries: 6 EU Member States which are not part of the euro area (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania) and four (potential) candidate 4