Do formal credit constraints affect the rural household consumption in China?

Jianmei Zhao, Jun Zhang and Peter J. Barry
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Jianmei Zhao: Central University of Finance and Economics, Haidian District, Beijing, China
Jun Zhang: Industrial and Commercial Bank of China at Sichuan Branch, Sichuan, China
Peter J. Barry: University of Illinois at Urbana, Champaign, USA

Agricultural Economics, 2014, vol. 60, issue 10, 458-468

Abstract: The article investigates the consequences of credit constraints on rural household consumption in China. Based on a unique rural finance and consumption survey, the authors first identify the credit constraint status of rural households from formal financial institutions. Then, they apply an endogenous switching regression model to compare the consumption responses to household production inputs for credit constrained and non-constrained households. The estimation results reveal that the credit constraint could result in the crowding out effect of the aggregate household consumption from its production inputs. Nonetheless, similar to the non-constrained households, the credit constraint households are capable of smoothing their necessary consumption.

Keywords: direct elicitation method; rural credit; switching regression model (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:60:y:2014:i:10:id:161-2013-agricecon

DOI: 10.17221/161/2013-AGRICECON

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