Agric. Econ. - Czech, 2014, 60(10):458-468 | DOI: 10.17221/161/2013-AGRICECON

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

Jianmei ZHAO1, Jun ZHANG2, Peter J. BARRY3
1 Central University of Finance and Economics, Haidian District, Beijing, China
2 Industrial and Commercial Bank of China at Sichuan Branch, Sichuan, China
3 University of Illinois at Urbana, Champaign, USA

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

Published: October 31, 2014  Show citation

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ZHAO J, ZHANG J, BARRY PJ. Do formal credit constraints affect the rural household consumption in China? Agric. Econ. - Czech. 2014;60(10):458-468. doi: 10.17221/161/2013-AGRICECON.
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