Income aspirations and peasants' willingness to borrow in rural China

Abstract

Using a comprehensive village-level survey data from two villages in Fuxian, China, collected in 2016 and 2021, we employ a Tobit model to analyze the consequences of income aspirations gap on peasants' willingness to borrow under different repayment terms. The willingness to borrow increases with the income aspirations gap of rural households and is moderated by social networks, though the moderating effect of time preference is observed only under 1-year repayment term. When borrowing purposes are introduced, the income aspirations gap significantly increases willingness to borrow only under 10-year repayment term when the purpose is future-oriented. Additionally, the relationship between the willingness to borrow and actual borrowing behavior is also examined, confirming that stimulating peasants' willingness to borrow from the perspective of income aspirations gap and facilitating the conversion of willingness into behavior is an effective way to address the insufficient financial needs in rural areas.