Can land transfer relax credit constraints? Evidence from China

Chen, C., Liu, B. and Wang, Z. ORCID: https://orcid.org/0000-0003-0374-346X (2023) Can land transfer relax credit constraints? Evidence from China. Economic Modelling, 122. 106248. ISSN 0264-9993 doi: 10.1016/j.econmod.2023.106248

Abstract/Summary

Although many studies have examined what drives credit constraints and their negative impact, evidence on the mechanism of relaxing credit constraints is scarce. This paper explores effective solutions to help households improve their access to credit. Using the China Family Panel Studies data from 2018, we employ an endogenous switching probit model to examine whether and to what extent land transfer can ease credit constraints. We find that households that transfer their land in or out are, respectively, 31.4% or 21.4% less credit constrained than those that do not. Participation in land transfers can improve borrowers’ financial situations through income increases and pledging assets as collateral, alleviating both formal and informal credit constraints. Our results suggest that any government initiatives to promote the efficiency of land transfer to ease credit constraints can help boost economic growth in China.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/108488
Identification Number/DOI	10.1016/j.econmod.2023.106248
Refereed	Yes
Divisions	Henley Business School > Real Estate and Planning
Publisher	Elsevier
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