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A Study on the Influence of Borrowing on Household Consumption Expenditures: A Layered Comparison from the Perspective of Alleviating Relative Poverty

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  • Lan Ma

    (School of Agricultural Economics and Rural Development, China Anti-Poverty Research Institute, Renmin University of China, Beijing 100872, China)

  • Ao Li

    (National Agriculture and Rural Development Institute, China Agricultural University, Beijing 100083, China)

  • Shikai Zhou

    (School of Agricultural Economics and Rural Development, China Anti-Poverty Research Institute, Renmin University of China, Beijing 100872, China)

Abstract

This study investigates how borrowing influences household consumption patterns in low-income and formerly impoverished regions of China, with implications for sustainable development goals (SDGs) such as poverty reduction (SDG 1), inclusive economic growth (SDG 8), and reducing inequalities (SDG 10). Using four rounds of 7516 households of balanced panel data from the China Family Panel Studies (CFPS), a fixed-effects model was employed to analyze the impact of borrowing on total and categorized household consumption. Instrumental variable and treatment-effects models were applied to address endogeneity issues. Results reveal that a 1% increase in borrowing boosts total household consumption by 0.026%, with stronger effects on developmental and investment-oriented consumption, particularly among low-income households. Formerly impoverished areas experienced greater consumption growth, especially in education and training, indicating higher domestic demand potential and faster human capital accumulation. The study concludes that improving financial markets, aligning credit with specific needs, and leveraging local resources are essential for upgrading consumption structures and alleviating relative poverty.

Suggested Citation

  • Lan Ma & Ao Li & Shikai Zhou, 2025. "A Study on the Influence of Borrowing on Household Consumption Expenditures: A Layered Comparison from the Perspective of Alleviating Relative Poverty," Sustainability, MDPI, vol. 17(6), pages 1-22, March.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:6:p:2782-:d:1616999
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    References listed on IDEAS

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    1. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
    2. James X. Sullivan, 2008. "Borrowing During Unemployment: Unsecured Debt as a Safety Net," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 383-412.
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