Does Adversity Affect Long-Term Financial Behaviour? Evidence from China’s Rustication Programme

55 Pages Posted: 15 Apr 2022

See all articles by Yi Fan

Yi Fan

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN)

Date Written: November 20, 2019

Abstract

This paper examines the long-term effects of adversity on financial behaviour. It draws on the largest forced migration experiment in history, China’s rustication programme. Evidence from the Chinese Twins Survey and Chinese Household Income Project shows that rusticated individuals behave conservatively with respect to finances over the long term, compared with their age-eligible but nonrusticated peers. They reduce housing consumption and its share of total assets, increase savings, accumulate more safe assets, and invest less in risky assets. Such patterns are consistent with evidence from manually collected county gazetteer data. Possible mechanisms include reduced productivity, habit formation, and psychological changes.

Keywords: Adversity, long-term effects, financial behaviour

JEL Classification: D1, J6, R1

Suggested Citation

Fan, Yi, Does Adversity Affect Long-Term Financial Behaviour? Evidence from China’s Rustication Programme (November 20, 2019). Journal of Urban Economics, Vol. 115, 2020, Available at SSRN: https://ssrn.com/abstract=4055730

Yi Fan (Contact Author)

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN) ( email )

Singapore

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
36
Abstract Views
224
PlumX Metrics