Wealth Disparity, Social Capital and Rural Households’ Accessibility of Informal Credit
XU Lihe, YUAN Yan
School of International Business, Southwestern University of Economics and Finance Research Institute of Economics and Management, Southwestern University of Economics and Finance
Abstract:
Using 2011 and 2013 Chinese Household Finance Survey (CHFS)data, this paper empirically tests whether different wealth disparity makes difference in rural households’ access to informal credit markets. We find that for the rural households who have financial demands, the wealthier they are, the more likely for them to borrow from informal credit markts. It could be attributed to that the poor have no extra money to invest on social network, thus lowering their possibility of borrowing. We therefore conclude that informal credit market alone may not solve the financial constraints of poor rural households. The results are robust after we use instruments to account for the endogeneity and to multiple specifications.
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