Abstract
With the increasing number of social networks emerging and evolving, the influence of social networks on human behavior is now again a subject of discussion in academe. Dynamics in social networks, such as opinion formation and information sharing, are restricting or proliferating members’ behavior on social networks, while new social network dynamics are created by interpersonal contacts and interactions. Based on this and against the backdrop of unfavourable rural credit development, this article uses CHFS data to discuss the whole and heterogeneous impact of social networks on rural household credit behavior. The results show that (1) social networks can effectively promote rural household credit behavior; (2) social networks have a significant positive impact on both formal credit and informal credit, but the influence of the latter is stronger; (3) both emotional networks and instrumental networks have a positive impact on formal credit and informal credit, and their influences are stronger on informal credit; (4) the influence of emotional network is stronger than instrumental networks on either formal credit or informal credit.
Highlights
For the past sixteen years, the documents of the Central Committee of the Communist Party of China (CPC) have been focused on the issue of “agriculture, rural areas and farmers.” From promoting supply-side structural reform in agriculture to combating poverty and implementing the strategy of rural revitalization, rural financial reform is always involved
China Household Finance Survey (CHFS) 2017 survey data were used as a source sample; the data were screened and cleared to determine the sample, whose process is as follows: firstly, the sample of urban household registration was excluded for this article mainly studies whether social networks affect the rural household credit behavior; secondly, minors and the elderly over 65 are often unable to borrow or have a weak willingness to borrow for reasons of trust, repayment ability, credit requirement restriction, etc
In the Durbin Wu Hausman endogeneity test, the D-Wu Hausman statistic is 3.782, and it is significant at the level of 10%, which indicates that there is endogeneity in the variable of social networks. e communication cost is selected as the instrumental variable, and the Wald F value is 60.616, which means the instrumental variable has passed the validity test. e results show that when communication fees are used as social network instrumental variables; for every 1% increase in communication fees, the scale of household credit increases by 0.684%
Summary
For the past sixteen years, the documents of the Central Committee of the Communist Party of China (CPC) have been focused on the issue of “agriculture, rural areas and farmers.” From promoting supply-side structural reform in agriculture to combating poverty and implementing the strategy of rural revitalization, rural financial reform is always involved. Considering the importance of social networks for rural economic development and the increasing formal credit demand, easing credit constraints, and raising the viability of formal credit institutions, this article studies the influence of social networks on rural household credit behavior based on social network theory, including the influence on formal credit behavior and informal credit behavior. What is more, it discusses the influence from emotional and instrumental heterogeneous perspectives. From theoretical and empirical analysis, we expect to explain the question of whether social networks can promote rural household credit behavior and how the relationship varies under the heterogeneous situation, expand China’s rural financial system, and improve the availability of rural household financial services to give targeted policy recommendations and satisfy the credit needs of rural households
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