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Religion and household borrowing: Evidence from China

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  • Feng, Dawei
  • Gao, Mengtao
  • Zhou, Li

Abstract

This study investigates the effect of religious beliefs on household borrowing behaviors from theoretical and empirical perspectives using microdata from the China Family Panel Studies (CFPS). The empirical results reveal that religious beliefs significantly increase households’ willingness to borrow. After propensity score matching, panel-fixed effect, instrumental variables regression, and robustness checks, the positive relationship remained. The mechanism analysis revealed that religious beliefs promote household borrowing by enhancing social networks. The effect of religious beliefs on household borrowing is more significant in rural areas with low income and low cognitive ability, but mainly promotes informal household borrowing, indirectly providing evidence of the underlying mechanism. Thus, this study plays an important role in guiding residents to hold reasonable religious beliefs and highlights the role of informal institutions in promoting the smooth development of the lending market.

Suggested Citation

  • Feng, Dawei & Gao, Mengtao & Zhou, Li, 2023. "Religion and household borrowing: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 60-72.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:60-72
    DOI: 10.1016/j.iref.2023.06.006
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