IDEAS home Printed from https://ideas.repec.org/a/fec/journl/v13y2018i3p369-396.html
   My bibliography  Save this article

Usury, Market Power and Poverty Traps: A Study of Rural Credit in 1930s¡¯ China

Author

Listed:
  • Zhiwu Chen

    (Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China)

  • Kaixiang Peng

    (School of Economics, Henan University, Kaifeng 475004, China)

  • Weipeng Yuan

    (Institute of Economics, Chinese Academy of Social Sciences, Beijing 100836, China)

Abstract

This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region¡¯s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury.

Suggested Citation

  • Zhiwu Chen & Kaixiang Peng & Weipeng Yuan, 2018. "Usury, Market Power and Poverty Traps: A Study of Rural Credit in 1930s¡¯ China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 13(3), pages 369-396, September.
    • Handle: RePEc:fec:journl:v:13:y:2018:i:3:p:369-396
    as

    Download full text from publisher

    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-007-018-0019-6
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    usury; rural credit; monopoly power; poverty trap; tenancy;
    All these keywords.

    JEL classification:

    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fec:journl:v:13:y:2018:i:3:p:369-396. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Frank H. Liu (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.