financial decisions. Regarding trust, research looks at advanced economies and the role of trust for participation in the stock market and risky financial assets more broadly, on the other hand it shows that the experience of previous economic crises can lead to higher levels of mistrust and therefore reluctance to participate in financial markets – a phenomenon which is particularly relevant for transition economies. We contribute to the literature by presenting new and unique evidence on savings in 10 Central Eastern and Southeastern European countries, distinguishing not only between formal and informal savings but also further distinguishing formal savings by bank savings and contractual savings (life insurance and pension funds) and capital market investments (stocks, bonds and mutual funds). Based on this evidence we can bridge the literature which analyzes the role of mistrust for informality and the literature which analyzes the role of mistrust for lack of capital market participation. Finally, we contribute to the research which investigates transaction costs by simultaneously analyzing the role of physical access and internet access. Our findings are descriptive and have constraints in providing causal explanations but will be of interest to policy makers in their endeavors to promote formal savings in ECA.

While we only focus on a subsample of countries in ECA, the results we obtain are at least to some extent applicable to the region more generally due to the common experience of transition from planned to market economies. Furthermore, our measure of savings is based on survey data and looks at whether households hold certain saving instruments, but we do not know the amount invested in the respective saving instrument. Therefore, our analysis only partially relates to the large body of research which studies savings in terms of flows, i.e. as the residual between income and current consumption, and analyzes saving motives (see Browning and Lusardi (1996) for an overview and Le Blanc et al. (2015) for a recent analysis of saving motives in the euro area, which highlights the importance of precautionary savings, savings for old age and credit constraint). With these limitations in mind, the remainder of the paper is structured as follows: The next section presents a brief literature review of the research on household saving which is relevant to our research questions. Section 3 provides details on the data source, presents descriptive evidence on the distribution of household savings in CEEU and WB and documents participation rates across a range of saving instruments including informal savings, bank savings, contractual savings and capital market investments. The econometric specification is outlined in section 4. Section 5 discusses why the percentage of savers is so low and analyzes the determinants of participation in specific saving instruments before we conclude.

# **2. Literature Review**

Poor households can and do save (Banerjee and Duflo, 2007), however, they may face higher constraints in using formal saving instruments including transaction costs which may include pecuniary costs, e.g., account opening fees, or non-pecuniary costs, e.g. travel time to the nearest bank. Bank branch density in CEEU and WB is high on average, but distribution of bank branches within countries is very heterogeneous (Beckmann et al., 2018). Three recent papers have highlighted the role of transaction costs in terms of geographical distance and the type of banks surrounding households: Allen et al. (2013) show that local presence of a bank has a positive and significant impact on households’ use of bank accounts and bank credit. Brown et al. (2015) study the expansion of a microfinance bank branch network in Southeastern Europe and show a positive 3