Internal Migration and Personal Loan Default in China

39 Pages Posted: 17 Oct 2018 Last revised: 15 Nov 2019

See all articles by Mike Aguilar

Mike Aguilar

Duke University

Ruyang Chengan

Independent

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Jin Xi

University of California, San Diego (UCSD), Division of Social Sciences, Department of Economics, Students

Date Written: September 20, 2018

Abstract

This study examines the effect of Chinese internal migration upon credit risk. Specifically, we track the likelihood of default on a large panel of individual personal loans provided by a prominent Chinese commercial bank. We find that internal immigrants (i.e. those that migrate from one area of China to another) are more likely to default than local borrowers at low-income levels. This relationship reverses as income rises. We document that immigrants are, on average, charged higher interest rates for loans of the same type, same amounts, and same maturities, than their local borrower peers (termed immigrant premium) and this higher cost of capital positively impacts relative default rates.

Keywords: Immigration, Credit Risk, Default Probability

JEL Classification: C41, G21, R23

Suggested Citation

Aguilar, Mike and Chengan, Ruyang and Francis, Neville and Xi, Jin, Internal Migration and Personal Loan Default in China (September 20, 2018). Available at SSRN: https://ssrn.com/abstract=3252468 or http://dx.doi.org/10.2139/ssrn.3252468

Mike Aguilar (Contact Author)

Duke University ( email )

Durham, NC 27708
United States

Ruyang Chengan

Independent ( email )

Neville Francis

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Jin Xi

University of California, San Diego (UCSD), Division of Social Sciences, Department of Economics, Students ( email )

CA
United States

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