IDEAS home Printed from https://ideas.repec.org/a/caa/jnlage/v60y2014i10id161-2013-agricecon.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/161/2013-AGRICECON.html
    Download Restriction: free of charge
    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/161/2013-AGRICECON.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.17221/161/2013-AGRICECON?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Martin Petrick, 2004. "A microeconometric analysis of credit rationing in the Polish farm sector," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(1), pages 77-101, March.
    2. Gershon Feder & Lawrence J. Lau & Justin Y. Lin & Xiaopeng Luo, 1990. "The Relationship between Credit and Productivity in Chinese Agriculture: A Microeconomic Model of Disequilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(5), pages 1151-1157.
    3. Pei Guo & Xiangping Jia, 2009. "The structure and reform of rural finance in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 1(2), pages 212-226, January.
    4. Charles A. Towe & Mitchell J. Morehart, 2009. "Credit Constraints: Their Existence, Determinants, and Implications for U.S. Farm and Nonfarm Sole Proprietorships," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 275-289.
    5. Conning, Jonathan & Udry, Christopher, 2007. "Rural Financial Markets in Developing Countries," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 56, pages 2857-2908, Elsevier.
    6. Kon, Y & Storey, D J, 2003. "A Theory of Discouraged Borrowers," Small Business Economics, Springer, vol. 21(1), pages 37-49, August.
    7. Huang, Jikun & Zhi, Huayong & Huang, Zhurong & Rozelle, Scott & Giles, John, 2011. "The Impact of the Global Financial Crisis on Off-farm Employment and Earnings in Rural China," World Development, Elsevier, vol. 39(5), pages 797-807, May.
    8. Michael R. Carter & Pedro Olinto, 2003. "Getting Institutions “Right” for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 173-186.
    9. Euan Phimister, 1995. "Farm Consumption Behavior in the Presence of Uncertainty and Restrictions on Credit," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(4), pages 952-959.
    10. Bell, Clive, 1990. "Interactions between Institutional and Informal Credit Agencies in Rural India," The World Bank Economic Review, World Bank, vol. 4(3), pages 297-327, September.
    11. Pei Guo & Xiangping Jia, 2009. "The structure and reform of rural finance in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 1(2), pages 212-226, January.
    12. Guirkinger, Catherine, 2008. "Understanding the Coexistence of Formal and Informal Credit Markets in Piura, Peru," World Development, Elsevier, vol. 36(8), pages 1436-1452, August.
    13. Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 402-415, November.
    14. Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 402-415, November.
    15. Akoten, John E & Sawada, Yasuyuki & Otsuka, Keijiro, 2006. "The Determinants of Credit Access and Its Impacts on Micro and Small Enterprises: The Case of Garment Producers in Kenya," Economic Development and Cultural Change, University of Chicago Press, vol. 54(4), pages 927-944, July.
    16. Foltz, Jeremy D., 2004. "Credit market access and profitability in Tunisian agriculture," Agricultural Economics, Blackwell, vol. 30(3), pages 229-240, May.
    17. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    18. Stephen R. Boucher & Catherine Guirkinger & Carolina Trivelli, 2009. "Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 609-640, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Reyes, Alvaro & Lensink, Robert & Kuyvenhoven, Arie & Moll, Henk, 2012. "Impact of Access to Credit on Farm Productivity of Fruit and Vegetable Growers in Chile," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126217, International Association of Agricultural Economists.
    3. Liqiong Lin & Weizhuo Wang & Christopher Gan & David A. Cohen & Quang T.T Nguyen, 2019. "Rural Credit Constraint and Informal Rural Credit Accessibility in China," Sustainability, MDPI, vol. 11(7), pages 1-20, April.
    4. Unal Seven & Semih Tumen, 2020. "Agricultural Credits And Agricultural Productivity: Cross-Country Evidence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(supp01), pages 161-183, December.
    5. Diana Fletschner & Catherine Guirkinger & Steve Boucher, 2010. "Risk, Credit Constraints and Financial Efficiency in Peruvian Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 981-1002.
    6. Hu, Lifang & Lopez, Rigoberto A. & Zeng, Yinchu, 2020. "Determinants of credit constraints for agricultural wholesalers in China," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 23(4), June.
    7. Wang, J. & Bi, S. & Lyu, K. & Zhang, C., 2018. "Does Formal Credit Constraint Restrain Agricultural Production?," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277536, International Association of Agricultural Economists.
    8. Kandilov, Amy M.G. & Kandilov, Ivan T., 2013. "The Impact of Interstate Bank Branching Deregulations on the U.S. Agricultural Sector: From Better Access to Credit to Higher Farm Sales and Profits," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149820, Agricultural and Applied Economics Association.
    9. Ali, Daniel Ayalew & Deininger, Klaus & Duponchel, Marguerite, 2014. "Credit constraints, agricultural productivity, and rural nonfarm participation : evidence from Rwanda," Policy Research Working Paper Series 6769, The World Bank.
    10. Mukasa Adamon N. & Anthony M. Simpasa & Adeleke Oluwole Salami, 2017. "Working Paper 247 - Credit constraints and farm productivity: Micro-level evidence from smallholder farmers in Ethiopia," Working Paper Series 2356, African Development Bank.
    11. Porgo, Mohamed & Kuwornu, John K.M. & Zahonogo, Pam & Jatoe, John Baptist D. & Egyir, Irene S., 2018. "Credit constraints and cropland allocation decisions in rural Burkina Faso," Land Use Policy, Elsevier, vol. 70(C), pages 666-674.
    12. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    13. Liqiong Lin & Weizhuo Wang & Christopher Gan & Quang T. T. Nguyen, 2019. "Credit Constraints on Farm Household Welfare in Rural China: Evidence from Fujian Province," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    14. Chen, Conghui & Liu, Bing & Wang, Ziyou, 2023. "Can land transfer relax credit constraints? Evidence from China," Economic Modelling, Elsevier, vol. 122(C).
    15. Turvey, C. G., 2017. "IFAD RESEARCH SERIES 10 - Inclusive finance and inclusive rural transformation," IFAD Research Series 280048, International Fund for Agricultural Development (IFAD).
    16. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    17. Shahidur R. Khandker & Gayatri B. Koolwal, 2016. "How has microcredit supported agriculture? Evidence using panel data from Bangladesh," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 157-168, March.
    18. Ayalew Ali, Daniel & Deininger, Klaus, 2012. "Causes and implications of credit rationing in rural Ethiopia : the importance of spatial variation," Policy Research Working Paper Series 6096, The World Bank.
    19. Tran, Minh Chau & Gan, Christopher & Hu, Baiding, 2014. "Credit Constraints and Impact on Farm Household Welfare: Evidence from Vietnam’s North Central Coast region," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 187495, New Zealand Agricultural and Resource Economics Society.
    20. Abbi M. Kedir & Ibrahim,Gamal, 2012. "Household-Level Credit Constraints in Urban Ethiopia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 20(1), September.

    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:caa:jnlage:v:60:y:2014:i:10:id:161-2013-agricecon. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Ivo Andrle (email available below). General contact details of provider: https://www.cazv.cz/en/home/ .

    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.