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Public pension and borrowing behavior: evidence from rural China

Author

Listed:
  • Conglong Fang
  • Qinghua Shi

Abstract

Purpose - The purpose of this paper is to investigate how China's rural public pension affects farmers' formal borrowing, which has always been rationed. Design/methodology/approach - This paper uses a difference-in-difference (DID) estimation to evaluate the effect of the implementation of the New Rural Pension Scheme (NRPS) at the end of 2009 on farmers' formal borrowing. Findings - The results show that the NRPS significantly reduces farmers' formal borrowing from rural credit cooperatives (RCCs). The effect is significant among the elderly, eastern China and high-income groups. Originality/value - This study contributes to the literature by identifying another potential reason for rural formal credit shortage. Policymakers and rural formal financial institutions should consider the demand side problem of lending.

Suggested Citation

  • Conglong Fang & Qinghua Shi, 2021. "Public pension and borrowing behavior: evidence from rural China," China Finance Review International, Emerald Group Publishing Limited, vol. 13(1), pages 63-78, January.
    • Handle: RePEc:eme:cfripp:cfri-07-2020-0103
    DOI: 10.1108/CFRI-07-2020-0103
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    More about this item

    Keywords

    New Rural Pension Scheme (NRPS); Formal borrowing; Consumer loans; Operating loans; G30; G51; H55;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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