Credit Constraints and Fraud Victimization : Evidence from a Representative Chinese Household Survey

Using a novel, nationally representative data set on fraud victimization, this paperexamines the impact of credit constraints on fraud victimization and potential underlying mechanisms in Chineseurban areas. After controlling for other household characteristics and regional fixed effects, householdsfacing credit constraints are associated with 2.3 percentage points higher probability of becoming fraud victims, andhave 20.4 percent higher subsequent economic losses from fraud when they are approached. The results are robust whendealing with the endogeneity of facing credit constraints and when addressing potential sample selection bias. Furtheranalyses show that the personal discount rate (impatience) and the need for social network expansion are criticalpathways via which credit constraints affect fraud victimization. The findings suggest that improving financialdevelopment is an effective way to reduce fraud victimization.