The Peer Effects of the Usage of Credit Cards in Rural Areas of China: Evidence from Rural China

This paper aims to explore whether the usage of credit cards has peer effects in rural areas of China. The results suggest that the usage of credit cards will be affected by the behavior of other farmers; namely, the usage of credit cards has peer effects in rural areas. We also verify that women, older, and low-academic farmers show stronger peer effects. The results emphasize that, compared with the mass farmers and vulnerable farmers, the usage of elite farmers is more likely to affect the same behaviors of other farmers. Our study contributes to prior literature by giving empirical insights into the consequences of peer effects on the credit card usage of farmers, which conduces to a better understanding of the financial decision-making of farmers. The research may provide a practical implication for the optimal design of policy interventions. On the one hand, banks and other financial institutions can promote innovative financial products in rural areas with the help of peer effects; on the other hand, regulators can regulate farmers’ wrong financial behaviors by the social multiplier of peer effects to reduce systemic risks in rural finance.