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Social networks, financing constraints, and rural household consumption

Author

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  • Cui, Bingbing
  • Chen, Yilang

Abstract

Utilizing data from the China Family Panel Studies (CFPS) for the years 2016, 2018, 2020, and 2022, this paper empirically examines the impact of social networks on rural household consumption and its underlying mechanisms. The findings indicate that social networks exert a significant direct positive effect on household consumption. Mechanism analysis reveals that social networks primarily stimulate consumption by alleviating financing constraints faced by households. This mediating effect is particularly pronounced among families without housing loans or other external debts. Furthermore, the degree of market participation by households positively moderates this relationship. Heterogeneity analysis shows that the positive effect of social networks is stronger in less urbanized regions with underdeveloped service sectors. Further analysis reveals that social networks influence consumption in a differentiated manner: they notably strengthen households’ spending on risk mitigation and near-term quality-of-life improvements, yet have limited impact on expenditures dependent on long-term formal financial support.

Suggested Citation

  • Cui, Bingbing & Chen, Yilang, 2026. "Social networks, financing constraints, and rural household consumption," Finance Research Letters, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:finlet:v:105:y:2026:i:c:s1544612326007555
    DOI: 10.1016/j.frl.2026.110227
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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