Environmental Infrastructure as a Catalyst for Rural Financial Resilience: Longitudinal Evidence from the Health–Credit–Income Channel

Sustainable rural development requires households to move beyond defensive medical spending and emergency borrowing toward more productive, forward-looking resource allocation. This study uses panel data from the China Household Finance Survey (CHFS), covering the 2017, 2019, and 2021 waves plus a newly released 2023 green-channel wave. We examine whether improvements in safe drinking water, clean cooking energy, and sanitation are associated with lower rural household economic vulnerability. We employ a staggered difference-in-differences design with household and year fixed effects, complemented by event–study tests, mediation analysis, and robustness checks. Environmental infrastructure improvements are significantly associated with lower child hospitalization and out-of-pocket medical expenditure, reduced reliance on high-cost informal credit, and higher income-generating asset shares. Mechanism analysis supports a “health–credit–income” channel, in which environmental improvements reduce preventable health shocks, ease emergency borrowing, and relax liquidity constraints on productive asset allocation. Threshold results further show that these financial-resilience benefits are strongest among households with the lowest baseline resource endowments. The study focuses on rural China, yet the identified health–credit–income mechanism offers a broader, scalable framework. Environmental infrastructure first reduces preventable disease burden, then eases emergency informal borrowing, and finally frees liquidity for income-generating assets. This sequence helps explain how environmental investment can create the financial preconditions for sustainable consumption and investment across developing economies. These findings offer micro-level evidence for integrating environmental infrastructure, rural financial resilience, and ESG social-value assessment.