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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Jianmei ZHAO & Jun ZHANG & Peter J. BARRY, 2014. "Do formal credit constraints affect the rural household consumption in China?," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(10), pages 458-468.
    • Handle: RePEc:caa:jnlage:v:60:y:2014:i:10:id:161-2013-agricecon
    DOI: 10.17221/161/2013-AGRICECON
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    References listed on IDEAS

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