Social Capital, Finance, and Consumption: Evidence from a Representative Sample of Chinese Households

37 Pages Posted: 11 Nov 2016 Last revised: 27 Apr 2018

See all articles by Robert Cull

Robert Cull

World Bank - Development Research Group (DECRG)

Li Gan

Texas A&M University - Department of Economics; National Bureau of Economic Research (NBER)

Nan Gao

Zhongnan University of Economics and Law

Lixin Colin Xu

World Bank - Development Research Group (DECRG)

Date Written: October 24, 2016

Abstract

Using a new, nationally representative sample of Chinese households, this paper studies how social capital affects access to credit and its implications for consumption levels. The paper focuses on two specific forms of social capital: private social networks and membership in the Communist Party. Although party affiliation is linked to higher consumption in rural areas, those benefits are direct and thus do not work through credit markets. The main finding is a strong link between private social networks, use of informal credit, and household consumption. Instrumental variable regressions indicate that the link is causal. However, the study finds no evidence that social capital has facilitated formal credit market development in China, as it has in countries with higher levels of private sector development.

Keywords: Educational Sciences, Urban Governance and Management, Municipal Management and Reform, Urban Housing, Urban Housing and Land Settlements, Access to Finance, Transport Services, Marketing, Private Sector Economics, Private Sector Development Law

Suggested Citation

Cull, Robert and Gan, Li and Gao, Nan and Xu, Lixin Colin, Social Capital, Finance, and Consumption: Evidence from a Representative Sample of Chinese Households (October 24, 2016). World Bank Policy Research Working Paper No. 7873. Available at SSRN: https://ssrn.com/abstract=2867654

Robert Cull (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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HOME PAGE: http://econ.worldbank.org/staff/rcull

Li Gan

Texas A&M University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Nan Gao

Zhongnan University of Economics and Law

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Lixin Colin Xu

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
MC 3-427
Washington, DC 20433
United States
202-473-4664 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/cxu

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