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China credit constraints and rural households’ consumption expenditure

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  • Li, Changsheng
  • Lin, Liqiong
  • Gan, Christopher E.C.

Abstract

The paper explores the impact of credit constraints on rural households’ consumption expenditure in South China. Previous studies have ignored the endogeneity between the credit constraints and consumption expenditure. We use two instrumental variables to resolve this problem. Our results show 54.9% of the respondents are credit constrained. The instrument variable model results reveal that the percentage rural households’ consumption expenditures who are credit constrained is 7.34% less than those who are not credit constrained. These results suggest that relaxing the credit constraints helps to improve the rural households’ consumption expenditures in developing countries.

Suggested Citation

  • Li, Changsheng & Lin, Liqiong & Gan, Christopher E.C., 2016. "China credit constraints and rural households’ consumption expenditure," Finance Research Letters, Elsevier, vol. 19(C), pages 158-164.
    • Handle: RePEc:eee:finlet:v:19:y:2016:i:c:p:158-164
    DOI: 10.1016/j.frl.2016.07.007
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    More about this item

    Keywords

    Credit constraints; Consumption expenditure; Rural households; IV model;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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