The effect of religiosity on trust and altruism: Evidence from China’s household borrowing

Abstract

Using China’s religion and household survey data, we find that a high degree of religiosity increases households’ willingness to borrow, both formally from financial institutions and informally from family and friends. A high degree of religiosity could facilitate formal household borrowing by fostering trust in transactions. However, the trust mechanism cannot explain the impact of religiosity on informal borrowing. We hypothesize that a strong religiosity might facilitate informal loans by promoting altruism, and we find supporting evidence. The effect of religiosity on informal loans is more pronounced in transactions where the parties involved are intrinsically less altruistic toward each other.