The clan and informal financing in China: An analysis of the trickle-down effect

Taixing Liu and Zhichao Yin

International Review of Economics & Finance, 2024, vol. 92, issue C, 646-666

Abstract: This study investigates the impact of clans on a household's informal financing. Using data from the China Family Panel Studies (CFPS), we find that clans significantly promote informal financing; a series of robustness checks verify this result. We further demonstrate that clans motivate affluent households with a collectivist ethos to lend, thus aiding households facing liquidity constraints in entrepreneurship, mortgage repayments, and medical expenses. However, our findings indicate that poor households do not benefit from clans, reflecting the proverb “help the starving but not the poor.” We confirm the indispensable role of clans in informal financing through analyzing the development of formal finance and population outflows. Our results clarify the relationship between clan culture and informal financing in contemporary China.

Keywords: Chinese clans; Informal financing; Trickle-down effect; Collectivist ethos (search for similar items in EconPapers)
JEL-codes: D14 O12 P20 Z10 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:92:y:2024:i:c:p:646-666

DOI: 10.1016/j.iref.2024.02.015

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